Cyprus Mail
CM Regular Columnist

The taxing time is here

End of April looms at the tax office

By Hermes Solomon

We’ve all received one by now and most of us have thrown it into a drawer and forgotten about it.

Tax returns based on 2014 income must be completed and returned before April 30, 2015, unless you submit your returns online via Taxisnet.com, which permit an extension of submission by a further three months. Why the disparity in submission dates, only Mr Y Lazarou, Commissioner of Taxation can say.

Now, if there’s anything that might spoil your Easter, it’s filling out tax returns – unless you have an accountant, that is.

I don’t, and got away with ‘murder’ for six years until the Inland Revenue finally caught up with me, whereupon penalties for unpaid tax due from 2007 were a nasty shock.

This past two years I have religiously gathered together all relevant files and information and submitted my returns on time – this year head scratching and soul searching for three days as to how to avoid the inevitable pitfalls – and believe me, now that the inland revenue are finally ‘on song’, it doesn’t pay to cheat.

Sooner or later – probably at time of probate – the ‘men in black’ will microscopically inspect your ‘estate’ and hit your inheritors hard! After all, they’ve got to earn their bread no matter how tidily you think you’ve left matters?

The noticeable difference between 2007 and 2014 returns is the rates of tax on bank interest earned – formerly 10 per cent tax on interest earned at anything between 4.5 and 5.00 per cent annually – taxing this interest barely making a hole in the bank balance.

But now, with interest rates paid to term depositors at anything from 1.85 to 2.5 per cent taxed at 30 percent, there is little if any encouragement to save at all.

And when one takes into consideration the shaky state of our banks, (unenforced repayment of the rising number of NPLs and an insolvency law yet to be passed) who in their right mind would deposit a large sum of money on term deposits in any of our five major banks? And if these two insufferable bills are not passed, our five major banks will be little more than piggy banks.

But if the bills are passed in their MoU form, half the householders of Cyprus will be homeless no matter what the DIKO leader says – a real dilemma.

Another worry for savers is that interest rates are turning negative and it won’t be long before banks ask you pay them to look after your money like they already do in Japan and Switzerland.

A major consideration for expat investors in UK stocks, pension funds, term deposits, bonds and equities is the rapid rise in the strength of sterling and London stock market.

This rise has benefitted those of us that receive a UK state or private pension here, but has hammered savers, who will be expected to pay more in the way of tax on interest and capital gains earned in the UK when converting profits from sterling to euros on the 2014 returns form.

Conversion can be done by going online to ‘average rate of exchange pound/euro’ and calculating the median over the 12 months of 2014, which is around 1.20 euros. And it is worth arguing with the Cyprus Inland Revenue if they demand this rate, which is the market commercial rate and not the rate you will exchange pounds for euros via bank transfers, banks always quoting a £/€ exchange rate at least 3 per cent lower than market – outright theft for an electronic transfer that takes seconds online.

On your 2014 tax return you will estimate what tax is liable in 2015 – usually in two halves – A to be paid before end of June 2015 and B, before end of December 2015.

Payment forms on interest received can be found on www.mof.gov.cy/mof/ird – search form “IR 601a) 2011 – payment of defence contribution withheld and self assessment of income subject to defence”

Tax due on any part of a term deposit or capital gain that matures in 2015 must be paid before the end of this year or penalties will accrue.

The stupendous rise in the value of sterling against the euro over this past three months will not have been overlooked by the Inland Revenue – an exchange rate of somewhere between 1.36/1.40 euros to the pound more than likely the median for 2015 – this increasing your tax liability in euros from previous years by anything up to 20 per cent.

When I arrived here 12 years ago, Cyprus was the island of plenty for nothing, but has become the island of nothing for plenty.

By the time tax authorities throughout the EU have finished with us, the wealth of the middle-aged middle class will evaporate into treasury coffers.

I know we pensioners will disappear sooner than most, but I would like to have left something to my grandchildren – all five of them brought up with good brains and tennis, who will not have sufficient fear/insecurity and will squander (third generation story and all that) what we are trying to arrange to leave them.

But probably with longevity in our two families (there are of course exceptions to the rule!) they may not get a look in, and ‘their’ children will be panting down our necks for us to bugger off from this planet.

Happy Easter!

 

 

 


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