Background information

The Union of Cyprus Municipalities, in collaboration with the Ministries of Finance and Interior, issued a tax reduction scheme in order to soothe the financial consequences of local businesses that have been emerged due to the pandemic. The Scheme addresses the municipal services provided to local businesses that have been compulsorily suspended or still suspend their activities in accordance with the relevant governmental Decrees.

Content of measure

Eligible for the municipal tax reduction scheme are businesses that have been compulsorily suspended or currently suspend their activities due to the coronavirus pandemic. The tax reduction is applied for the following municipal fees:

• the professional establishments fee
• the entertainment and catering establishments’ fee
• the waste collection fee
• the outdoor rent for dining purposes for restaurants/cafeterias
• the rent for Municipal premises by businesses
• the revenue from the exploitation of beaches

The reduction of taxes is calculated based on the type of business, the days of the suspension of the activities and the percentage of the loss of the income of businesses. The tax reduction starts from 14% for the first group (e.g., retail shops, construction businesses, and tourist agencies), to 19% for the second (e.g., hairdressing saloons, museums, restaurants, cafeterias, public and private schools), to 24% for the third group (e.g., malls, sport centers, hotels, thematic parks, nurseries), to 34% for the last group (e.g., night clubs, theaters, cinemas).

Use of measure

The estimated loss of revenue for Municipalities, according to the announcements of their Mayors, is huge. Major municipalities announced the following revenue loss:

• Municipality of Strovolos €2 million
• Municipality of Nicosia €2.6 million
• Municipality of Paphos €6 million
• Municipality of Paralimni €5 million
• Municipality of Aradippou €1 million

Some Municipalities are still unable to calculate the loss in revenue because the payment procedure is still on going.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Local / regional government	Local funds National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	No involvement
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: N/A

Involvement

The tax reduction scheme was suggested by the Union of Cyprus Municipalities (UCM) as a means to support businesses and supported by all member municipalities of the Union; no other social partners participated in the designing or implementation of the Scheme. The suggestion of the Union was also supported by the Ministries of Interior and Finance who accepted the proposed measures and procedures of the Union and prepared the list for the grouping of businesses

Views and reactions

Cyprus Employers and Industrialists Federation (OEB) viewed the scheme very positively, emphasized on the importance of the measure for businesses but requested the implementation of the Scheme for businesses that have been partially suspended or currently suspend their activities.

Sources

• 12 June 2020: Μεγάλες μειώσεις στις φορολογίες των δήμων (inbusinessnews.reporter.com.cy)
• 25 September 2020: Μεγάλες τρύπες στα οικονομικά των δήμων (www.stockwatch.com.cy)