Cyprus is ready to increase VAT rate

01.12.2011 Cyprus Ministry of Finance declared the necessity to increase VAT tax rate from 15% to 17%. The country's budget can’t cope with the repayment of external debt. Tax rates increase is vitally necessary for the island to reduce the budget deficit to below 3% of GDP and in the project to 2.8% of GDP by the end of 2012.
Initially, Cyprus experts’ forecast provided budget deficit lowering to 2.3% of GDP in 2012, but subsequent analysis of the current economic situation of the island changed the calculation.
The first wave of tax reform did not influence the rates of VAT in Cyprus, however, most likely, already in 2012 17% rate will be applicable.

Expert’s opinion

“Cyprus continues to implement reforms in the tax sphere. A new wave of tax rates increase, including the VAT rate increase from 15% to 17% already in 2012 is coming. These changes are to take place because of budget deficit worsening, rising of public debt, as well as in response to indications of the EU and the IMF to strengthen the effectiveness of internal politics of the island. However, in comparison with other jurisdictions – state members of the EU, Cyprus continues to be the most profitable from economic point of view and attractive country for foreign investment”.

On the basis: www.tax-news.com

Andrianova Irina ( the lawyer of international consulting department of Honest&Bright)