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HomeProperty NewsFall in tax revenue attributed to Cyprus property market collapse

Fall in tax revenue attributed to Cyprus property market collapse

TOTAL tax revenues collected by the Cyprus Inland Revenue Department during the first ten months of 2009 fell by 15% to €1.45 billion from €1.72 billion during the same period last year; a reduction of €261.71 million.

This drop is entirely attributable to the collapse of the property market. And it raises concerns that if foreign demand for property fails to recover the government will lose a significant source of much-needed revenue for ever.

Capital Gains Tax receipts in the Jan-Oct 2009 period fell by a massive 79% to €59.9 million from €278.86 million a year ago as the number of property transactions fell sharply and in some areas came almost to a standstill.

Inland Revenue Tax Collections Jan – Oct 2009
€ millions
Jan – Oct 2008
€ millions
Increase/ Decrease
€ millions
%age
Change
Income Tax
– Employees 399.61 355.35 44.25 12.5%
– Self employed 47.45 48.11 -0.66 -1.4%
– Corporation Tax 556.44 612.19 -55.75 -9.1%
Immovable Property Tax 9.77 10.63 -0.85 -8.0%
Capital Gains Tax 59.95 278.86 -218.91 -78.5%
Special Contribution to Defence Fund 306.18 313.68 -7.50 -2.4%
Stamp Duty 34.18 56.61 -22.43 -39.6%
Penalties 35.34 36.55 -1.21 -3.3%
Other Taxes 7.99 6.65 1.35 20.2%
Total Collections 1,456.92 1,718.63 -261.71 -15.2%

Inland Revenue Tax Collections (source: Cyprus Inland Revenue Department)

On the other hand, Income Tax from employees increased by 12.4% to €399.6 million, whilst Corporation Tax fell 9% to €556.4 million. Revenue from the 10% Special Contribution to Defence Fund imposed on bank deposits fell marginally by 2% to €306.1 million as total deposits placed with the banks also fell during the period.

The figures are in line with other government statistics, which show that that during the first ten months of the year, the number of property sale contracts deposited at the Land Registries fell by 50%.

Number of Properties Sales – 2008/2009 Comparison
Location Nicosia Famagusta Larnaca Limassol Paphos Total
Month 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009
January 367 101 187 37 345 77 301 152 415 91 1615 458
February 349 161 269 52 312 112 345 132 306 101 1581 558
March 365 162 142 49 229 97 317 160 273 112 1326 580
April 296 162 143 71 296 122 310 126 291 122 1336 603
May 325 184 216 68 282 134 268 146 275 107 1366 639
June 298 188 166 82 289 152 297 189 336 142 1386 753
July 330 254 225 114 266 141 369 214 352 179 1542 902
August 155 173 128 64 165 135 236 148 252 122 936 642
September 238 235 196 83 241 113 233 174 249 152 1157 757
October 228 195 128 88 211 114 235 182 214 144 1016 723
Total Sales 2951 1815 1800 708 2636 1197 2911 1623 2963 1272 13261 6615
% Change -38% -61% -55% -44% -57% -50%

Cyprus Property Sales (Source: Cyprus Land Registry)

According to the October figures, the Finance Ministry estimates that the deficit in the first ten months of 2009 stands between 3% and 3.5%, paving the way for an excessive deficit procedure against Cyprus in the spring of next year

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