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EC: Taxation trends report in the EU

24/08/2017 14:26
EU tax revenues continued to grow in most Member States throughout 2015, according an annual report on taxation trends, published by the Directorate General of Economic and Financial Affairs of the European Commission. According to the report, from 2009 to 2015 the share of consumption and capital taxes in total taxation increased in the EU, while environmental tax revenues have moved rather little since 2012 .

Meanwhile the VAT rates remained stable in 2017 and rate changes are far fewer since 2015. Average top personal income tax rates also stable in 2017. Average top corporate rates continued to edge downwards in 2017, but rates have dropped much more slowly since the crisis

The report contains a detailed statistical and economic analysis of the tax systems of the 28 Member States of the European Union, plus Iceland and Norway which are members of the European Economic Area. In addition to the analysis of Europe-wide trends and includes country chapters covering the 28 EU Member States, Iceland and Norway, presented within a unified statistical framework (the ESA 2010 system of national and regional accounts).

On Cyprus, the DGECFIN report presents an overview of the latest tax developments and reforms. The report notes that "through Income Tax amending law 135(I)/2016 criteria are specified so that payments to innovative small and medium enterprises can be deducted from taxable income" and "any existing provisions are abolished (per law abolished benefits were given when there was a purchase of shares, but with the new law payment scope extended but benefits are given only to individuals)".

The reports covers the law enacted (76(I)/2016) providing the opportunity to persons who owed unpaid contributions up to and including 31/7/2016, to enter into an agreement with the social insurance services to repay all amounts due as at that date in a maximum of 54 monthly instalments, provided that they simultaneously settle their current obligations as they arise during the agreed period. Under this Law, notes the report, if persons opt to pay the amounts due in less than 54 instalments, part of the penalty as at that date can be waived. Special criteria are in place in cases of default. Applications for the use of this scheme could be made between 1/8/2016 - 30/11/2016.

According to the report, with Income Tax Amending Law 110(I)/2016 as from 1.7.2016, 80% of eligible profits from eligible intellectual property that did not produce income or their development was not concluded by 30/6/2016 , can be deducted at the option of the taxpayer. Eligible properties are specified in regulation 336/2016 published 18/11/2016. The report notes that through Income Tax Amending Law 110(I)/2016, costs for the purchase/ development of intellectual property that did not produce income, or where the development was not concluded by 30/6/2016, can be deducted over the life of property up to a maximum of 20 years. The taxpayer can elect for a lesser amount to be deducted in any year.

The report also covers the regulation ( 367/2016) for the compulsory online submission of VAT returns. Through an administrative decision, farmers and urban taxi drivers under special regime are exempted from compulsory on-line submission.

Finally it notes the amendment to Immovable Property Tax Law reducing liability to Immovable Property Tax for the year 2016 to 25% of the amount assessed, provided tax was paid by 31/10/2016. If tax was paid between 1/11/2016 and 31/12/2016 liability is reduced to 27.5 % of the amount assessed and if paid after 2016 a 10 % penalty is added on the reduced liability of 27.5 % of amount assessed. This tax was paid annually and includes all immovable property held as de ned irrespective of whether business or residential. It also notes that article 3 of amending law abolishes immovable property tax law as from 1.1.2017 and states that "the Minister of Finance decided not to extend the application of Law on the Special Contribution. Therefore the Law ended on 31.12.2016".

Cyprus in 2015 collected 2.6 billion euro in indirect taxes, 1.5 billion of which through VAT, ranking 10th and 8th in the EU charts in %of the GDP terms. Direct taxes amounted to 1.7 billion (16th place in the EU), 0.5 billion paid by individuals (28th place in the EU), 1 billion by corporations and 0.2 billion by others. Furthermore 1.5billion in social contribution have been paid (20th place in the EU), 1 billion by employers and 0.5billiion by households. The country also collected 0.2billion taxes (13th place in the EU) and 0.5 billion on environmental taxes (8th place in the EU).