VAT on taxis drops to 8%

The VAT rate for taxi journeys is set to drop to 8% from the current 15% following a decision by Minister of Finance Makis Keravnos.

The minister had come under pressure from the taxi drivers’ association, who demanded a cut in the tax to offset the steep rise in the cost of fuel–the result both of higher taxes on fuel and high international oil prices.

The Ministry will now seek EU approval to apply a VAT rate of 8%.

Taxi firms with less than 10 licences would be taxed at a flat rate of CYP 300 per year, which is estimated to be 8% of revenue for such companies. It will be payable in two instalments.

Taxi companies with more than 10 licences would pay 8% on revenues and would have to file full VAT returns.

The reduction is set to come into force on July 1, 2005.

Taxi companies also secured agreement for more favourable tax treatment on renewing car fleets.

They will be able to renew their fleets every five years at the reduced rate of duty (75% off the norm), compared with every 8 years previously.