Limassol, August 2011 - The Cyprus House of Representatives pulled up their sleeves and on 26 August, 2011, passed a so-called First Package of Austerity Measures, which aims at addressing the local impacts of the global economic crisis and contributing towards fiscal consolidation.

The package includes a €350 annual levy payable by Cyprus-registered companies. Also, tax on gains from interest on deposits has been set at 15% (from 10%) and tax on dividends at 17% (from 15%.) There has also been an increase in immovable property taxes. The House has also voted on a hefty tax incentive to highly paid non-Cypriot resident individuals who work for Cyprus-based companies. For more details on these measures, please click here.

Also, for the first time in the island’s post-independence history, Cyprus MPs dared tamper with civil servants’ iron clad rights and privileges and imposed a 3% pension contribution on their gross salaries. The House also imposed a 2% contribution by all civil servants to the widows and orphans fund while all newcomers in the broader state sector will be paying a 6.8% contribution to the social insurance fund.

MPs also approved lowering VAT when buying a first residence to 5% and raised income tax on income over €60,000 to 35%.

A Second Package of Economic Measures is in the works and should be tabled before the House very soon.

The measures are the result of extensive discussions between the government, the political parties, trade unions and professional bodies.