‘exceptional’ cyprus praised

Cyprus has achieved ‘unprecedented success’ over the last year, according to finance officials.

The Cyprus Inland Revenue Department (CIRD) recently stated that the last year has been exceptional for the property market, the success of which has helped Cyprus yield an unprecedented fiscal surplus representing 3.3 per cent of gross domestic product. 

 However, the very latest figures from the CIRD reveal that direct tax revenues rose 8.0 per cent year-on-year in the first quarter of 2008, but capital gains tax revenues fell 5.0 per cent, suggesting a deceleration of the property market.

A spokesperson for the CIRD commented:  “Total revenue from January to March 2008 reached €445.8 million, compared to €413.45 million over the same period last year. Revenue from capital gains tax, which is charged on real estate transactions, fell to €90.86 million in the first quarter of 2008, compared with €96 million in the same period of 2007.

"Immovable property tax revenue, an annual levy imposed on households based on market values, fell 22 per cent to €1.22 million. Revenues from corporate tax rose 17 per cent to €78.38 million".

Property developers have urged the Central Bank to loosen restrictions imposed on mortgages for secondary homes, introduced last year to dampen high credit expansion amid fears it could stoke inflationary pressures.

Authorities plan to introduce a 15 per cent VAT tax levy on building plot purchases from July, and developers are worried that the new tax, coupled with lending curbs, could stifle the market.