Cyprus’ overdue tax debts rose to €4.05 billion in the first quarter of 2025, nearly €1 billion higher than the same period of 2024, according to the quarterly progress report submitted by the Tax Department to the House. 

The report, prepared under article 9E of the Collection of Taxes Law of 1962 and the VAT Law 95(I)/2000, was delivered by Tax Commissioner Sotiris Markides and accompanied by an annex detailing arrears in both direct taxation and VAT by category. 

Out of the €3.4bn owed in direct taxation, €2.54bn concerned unpaid tax, €620.2 million interest and €237.3 million surcharges.  

From this, €867.6m cannot be collected because of pending appeals and objections, while €665.3m relates to 44,184 taxpayers under liquidation or bankruptcy proceedings, or debts deemed irrecoverable after their completion. 

The report noted that €28.4m, owed by 422 taxpayers, is being repaid through monthly instalments under settlement arrangements and is under monitoring.  

Another €122.2m concerns 8,731 taxpayers that authorities have failed to trace, mainly due to absence abroad or death, while €191.1m is linked to 1,982 debtors without assets, income, borrowing capacity or any other means of repayment. 

A further €483.4m has been deducted from arrears relating to 3,971 taxpayers due to double counting across categories.  

In addition, €603.6m has been managed using the powers granted to the tax commissioner in 2014, which include registering charges on immovable property and freezing or seizing funds held in bank accounts. Debts of €365.4m are already under judicial enforcement, covering 4,332 taxpayers. 

Overall, €2bn in direct tax arrears are considered suitable for collection measures, out of €2.66bn across all categories, yet the commissioner acknowledged that €1.85bn in direct taxes are difficult, if not impossible, to recover. 

As for VAT, arrears reached €656.6m, comprising €454.3m in unpaid tax, €152m in interest and €50.2m in surcharges.  

However, the Tax Department pointed out that because VAT debts are being transferred into the TFA system, detailed categorised data is not yet available for most cases. 

According to the report, €601.7m in arrears linked to 7,273 taxpayers are under MEMO measures, involving charges on immovable property.  

Of this amount, €369.6m relates to direct taxation and €232.1m to VAT. Collectible arrears without court measures and before seizure orders amounted to €1.69bn, including €1.27bn in direct tax and €424.6m in VAT, while funds already frozen or seized from bank accounts stood at around €2m. 

The annex also recorded €27.8m of arrears that have been included in a special settlement scheme for overdue taxes. 

Separately, the audit service warned that Cyprus is losing millions in unpaid taxes after thousands of cases from 2014–2017 fell outside the legal deadline for assessment.  

It noted that both individuals and companies were affected, with many assessments issued too late to be enforceable, meaning the state forfeited its right to collect them. 

The service also cautioned that many taxpayers with taxable income are missing from pending figures, and that most assessments in recent years were imposed without proper audits.  

It urged the tax department to prioritise high-risk firms and issue assessments within the legal timeframe to safeguard public funds.