Business taxes boost state revenue

Businesses in Cyprus appear to have been the main contributors to the state budget in 2005, as a sharp rise in both defence tax (the “special contribution for defense” [sic]) and corporate tax lined government coffers.

Total revenue came in at CYP 667.2 mln, according to the Inland Revenue Department, recording a rise of 11.7% on the previous year’s CYP 597.5 mln. Revenue was also higher than the government’s expectations of CYP 581 mln.

Revenue from defence tax, which is paid on dividends and interest, among other things, leapt by 24% to CYP 111.2 mln, compared with CYP 89.6 mln in 2004.

Corporate tax rose by 16% to CYP 237.6 mln, compared with CYP 205.4 mln in 2004.

A strong performance from the offshore sector, possibly boosted by a high oil price, is thought to be the main reason.

Personal income tax was up by less than average at 10%, while capital gains tax rose by 8%.

The revenues from the corporate gains tax and the employees’ income tax increased by 10% and 8% respectively.

Income from the self-employed showed a decline of 10% to CP 24.3 mln, copmared with CYP 27 mln in 2004.

After seeing that only a small proportion of the self-employed, who include medical specialists and lawyers, report income above the CYP 10,000 threshold, the government passed legislation late last year to try to widen the tax net.