BOAT owners are ready to leave Cyprus in their droves and set sail for cheaper shores since the government slapped a 38 per cent tax on pleasure crafts, according to a number of shocked yacht owners.
Owners of duty-free yachts and people wishing to import yachts or buy them locally will now be subject to a 20 per cent luxury tax plus 15 per cent VAT on total cost plus duty. In effect, boat owners who are in the country for more than 185 days and therefore considered Cypriot residents will have to fork out 38 per cent of the cost of the boat to keep it in Cyprus.
Haris Kyriakides, president of the Cyprus Marine Commerce and Industry Association (CMCIA), says the new taxes have already wiped away demand for local and imported pleasure boats while threatening to drive away owners of duty-free boats that so far enjoyed annual tax exemption forms. The law has been drafted so that even if a company is registered abroad, it takes only one shareholder to be a Cypriot resident for the company to be taxed on a boat it owns in Cyprus, Kyriakides said. In effect, a boat worth £3 million would cost the owner £1 million in taxes under the fiscal reforms.
“Many of these people own offshore companies that had originally decided to stay on after EU accession. But most boat owners, some of whom own boats in their millions, will rather leave than pay such a high tax,” said Kyriakides. “We appreciate that we have to change the law to harmonise with Europe but we should also respect our citizens; not make things harder for them by basically telling them to go spend their money elsewhere. Every other country in the EU charges VAT only on pleasure crafts. We are the only ones adding excise duty to that,” he said.
Kyriakides added that EU residents could take their boat to any EU country instead and pay only VAT there. “As long as they keep the boat there for the first six months, after that they can take their boat anywhere in the EU tax-free.”
One boat owner who runs an offshore shipping company in Limassol was shocked to hear that he would have to pay a third of the cost of his yacht once his tax exemption form expired.
“I am shocked and find it unacceptable. If they go through with this, the marina will be emptied to a great extent,” said Klaus Oldendorff, who plans to move his yacht to Greece if forced to pay the full tax.
Another boat owner who has been living as a temporary resident in Cyprus for 18 years was quite willing to pay the VAT on the boat as in other EU countries, but found it unthinkable to pay the full 38 per cent levy. “This tax means I could never market the boat internationally. It would be way above the market price, and the local market is too small to sell it here,” said Brian Tollafield, head of an offshore consultancy firm.
“Our objective is to run the company from a place which is most convenient to us, and as such we fully subscribe to paying our taxes. But this boat tax is commercially unsound. No one is willing to pay more than the money’s worth,” he said, adding: “This is negative taxation.”
“If I was able to pay the level of VAT required, I would pay it straight away. But at this rate, I will be forced to take the yacht elsewhere, and there are a number of new or beautiful marinas available in Beirut, Greece, Turkey or Syria,” said Tollafield.
Asked whether this would not only affect nautical tourism but also the island’s appeal to offshore companies, Tollafield replied that a number of offshore companies were in the process of closing or had already closed.
“This is a fantastic country. It has done a great job in harmonising with the EU and is streets ahead of its fellow candidates. But they have got to view taxation rationally. Tax has to be constructive for the country, for the marina industry and to the concept of yachting development. This tax is destructive,” he said.
Commenting on efforts by Commerce Minister Nicos Rolandis to promote nautical tourism in Cyprus, with plans under way to build four new marinas in Limassol, Paphos, Ayia Napa and Protaras while extending Larnaca marina, Tollafield said the tax reform spelt financial suicide. “With a 38 per cent tax, who would come to these marinas?” he asks.
Rolandis told the Cyprus Mail yesterday that his ministry agreed with boat owners’ demands to scrap the excise duty and impose VAT only. “We are looking into the matter closely, given that we hope to develop six marinas in Cyprus and make 4,100 new places available,” he said.
The Commerce Ministry is not responsible for taxes, however, and has written to the Finance Ministry on the matter. “We have to wait and see what the response of the ministry responsible will be before we take further action,” said the minister.
The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.
