Cyprus tax authority identified 513 major debtors owing €44 million

The Cyprus Tax Department identified 513 major non-payers, whose combined debt in direct taxes (income tax, capital gains tax, defense levy) and VAT reached €44.1 million by 2025. The average debt of one person on the list is about €86,000. The debt situation is extensive: according to the report by Tax Commissioner Sotiris Markides, total debt has exceeded €4 billion, compared with €3.1 billion a year earlier, while about 75% of direct tax debts have extremely low chances of recovery. In response to the increase in arrears, which reached €4.64 billion in 2025, enforcement measures are being tightened from January 1, 2026 as part of the tax reform: debtors owing more than €20,000 face sealing of premises, and for debts above €100,000, share freezes are planned. An initiative to publish lists of major non-payers is also under discussion.

Separately, the department reviewed the legality of using the reduced VAT rate of 5% instead of the standard 19%, which applies when buying or building a primary residence. The audit found 93 people who had illegally used the benefit — they were additionally charged a total of €11.5 million. The offenders registered property as their primary residence, but then rented it out through Airbnb and Booking or used it as holiday homes. In total, more than 5,000 inspections have been carried out over the past three years, revealing violations worth about €50 million, mainly in coastal areas and student districts, including Engomi and Aglantzia.

To verify eligibility for the reduced VAT rate, the Tax Department cross-checks electricity and water bills, monitors short-term rental activity and conducts site inspections. If violations are found, the benefit is revoked, and the owner must pay the difference between the 5% and 19% rates proportionally for the remaining years of the mandatory ten-year residence period.