FISCAL reforms are taxing yacht owners out of Cyprus, with 12 having already set sail, taking their boats and business to cheaper shores.
More are expected to follow suit, at a time when the government is inviting tenders for the building of four new marinas as part of efforts to expand nautical tourism.
“We have become the most expensive country in Europe with, what is in effect a 38 per cent tax on boats. It makes no commercial sense whatsoever, either for business or tax revenue, and the consequences on nautical tourism will be huge,” said Haris Kyriakides, President of the Cyprus Marine Commerce and Industry Association (CMCIA).
Referring to the pleasure boat tax set under the last wave of tax reforms, Kyriakides said, “Boat owners are left with two choices, either they pay or they leave. And I don’t think anyone is willing to pay.”
Previously, tax was set at 10 per cent for luxury yachts plus VAT. Now, authorities have doubled excise duty to 20 per cent, while VAT has risen to 15 per cent on the cost plus duty, in effect setting a 38 per cent levy on both Cypriot and foreign-owned yachts.
The effects of the tax are already being felt, according to Kyriakides, who knows of at least 12 yacht owners who have left, while many more have stated their unwillingness to dish out taxes that amount to a third of the cost of the boat.
Boat owners were previously allowed to berth at the marinas tax-free if they had a tax exemption form, C104. The law now states that anyone who spends more than 185 days in Cyprus and buys a boat or owns a boat is subject to the new tax.
“It will be cheaper for boat owners to go to any other European country, where they only have to pay VAT. If they are based there for six months of the year, they are then able to park their boat in any other EU country tax-free. Given that the highest VAT in Europe is 25 per cent in Denmark, there is absolutely no incentive to stay in Cyprus. We are the only ones who levy excise duty plus VAT,” said Kyriakides.
According to studies by the CMCIA, tax revenue from the new scheme will not outweigh the business created from luxury boats, in terms of crew, maintenance and berthing costs.
“Many yacht owners have told me that they would be willing to stay if they had to pay VAT only, like other EU nations. Otherwise, not only will people leave, but businesses will go too, and the revenue they create. Nobody has bought a boat since the tax came into effect and many have cancelled their orders. As soon as people’s annual tax exemption form expires, a lot more will follow suit,” said Kyriakides.
The CMCIA will be meeting with party leaders and the government after the elections, said its president, adding that previous efforts to find out why the tax rate was so high came up with nothing other than the answer that it was a way to make up for tax cuts elsewhere.
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