2nd package of Austerity measures
We would like to inform you that the Cyprus House of Representatives voted and agreed the new package of austerity measures. In light of the crisis in Europe these measures are necessary and unavoidable and give the assurance and guarantee of the financial, political and social stability as well as the economic growth of Cyprus.
The voted measures are:
- The contribution of the public sector employees with the freezing of their salaries (surcharges and ATA) for two years. Furthermore the public sector employees at the top salary scale, will pay an additional contribution of 0,5%.
It has also been decided to reduce the salaries of the air traffic controllers and Judges who were excluded from the previous measures voted in August 2011, they will contribute an amount of 3% of their salary, which is also the contribution made by other public sector employees.
The Parliament decided that the private sector employees will also contribute to the scheme according to the scales and rates applicable to the public employees for a period of two years. The contribution will be shared equally between the employers and the employees.
All contributions in the public and private sector are deductible from income tax.
At the same time, the extraordinary contribution of the public employees with monthly revenues of up to €2,500 is terminated. All the above will be applicable as from the 1st of January 2012.
- The increase in the tax ratio of the deemed profits from dividends will increase from 17% to 20%. This will be applicable for dividends which will be payable after the publication in the official gazette and it will be in force up until 31st of December 2013.
- Specific measures for the elimination of tax evasion via the approval of legislations such as taxation as dividends of the loans withdrawn by managers or family members from their companies and prohibition of removal of wages for which no contributions were paid to the SSF.
- The approval of the bill for the VAT increase from 15% to 17% has been passed. The increase of the VAT will be applicable as from 1st of March 2012.
In parallel to this, the Parliament has passed rule which amend the VAT law. Any person subject to the VAT is obligated to issue a delivery receipts in cases of delivery of goods and rendering of services that are subject to VAT. Also, it should be notated that all entities which are subject to VAT, should keep copies of their receipts for 7 years. This rules/law applies from 1st of January 2012.
- Cuts have also been introduced on child and student benefits, even though the relevant income for a family has been raise to 39 thousand euro per annum. For single parent families the child benefit will be paid providing the child resides in Cyprus for a period of three years and more. Benefit will be paid to students up to the age of 20 providing that they are still in full time education.
Student benefits will be applicable under the same terms and conditions that are applied degree students and first master degree.
- Important changes have been made by the Parliament to the Law. The changes relate to Government support for Banks.
Two new schemes have been voted, Banks will be charged an amount of 0,03% on all deposits which will be paid into the Stability Fund, this will be launched by the Central Bank of Cyprus in 2013.
For the Second scheme the Government will intervene in cooperation with the Central Bank to support the banks by providing guaranties, loans and funds towards the Capital. This temporary measure will only be applicable until the 30th of April 2012.
- Parliament also voted an amendment to the Company Law, in which Companies will have the right to issue capital under the actual nominal value.