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Cyprus Tax Debt Hits €4.64 Billion With €1 Billion In New Arrears

Tax Debt Swells To €4.64 Billion

Cyprus’ tax debt has risen to €4.64 billion from €3.93 billion a year earlier, highlighting the scale of the challenge facing the Tax Department as it steps up collection efforts following the tax reform that came into force on January 1.

Of the total, €3.32 billion is classified as immediately payable debt, meaning it is due and can be pursued by the state without delay. The remaining €1.31 billion is considered difficult to recover and is not treated as immediately collectable.

Nearly €1 Billion In “Fresh” Arrears

Almost €979.4 million of the outstanding tax debt relates to liabilities less than one year old, accounting for 29.5% of immediately payable debt.

A further €992.6 million, or 29.9%, has been outstanding for between one and four years. The largest share, more than €1.32 billion, consists of debts that are over four years old.

Collections And Enforcement Underway

Before collection measures were applied, immediately payable debt stood at €3.32 billion, compared with €2.29 billion at the end of December 2024.

Of that amount, €901.5 million is already subject to enforcement action. This includes €325.9 million in cases before the courts and €575.4 million under administrative collection measures, including memos on immovable property and the seizure of funds from bank accounts.

The amount recovered through bank account seizures remains relatively small at €263,000. Following these measures, immediately payable debt still stands at €2.42 billion.

New Tools Strengthen The Tax Department

The tax reform has expanded the Tax Department’s enforcement powers in an effort to improve compliance and accelerate debt recovery.

Alongside memos and bank account seizures, authorities have begun sealing business premises for tax debts exceeding €20,000, as well as for failing to issue receipts or invoices. From 2027, the measure will also apply to taxpayers who fail to submit tax returns.

Criminal Cases And Payment Plans

The department is also pursuing criminal prosecutions in cases involving unpaid withheld taxes, including VAT, PAYE and the Special Defence Contribution, as well as the non-submission of tax returns.

These proceedings may result in penalties, settlement agreements or structured repayment plans. In some cases, taxpayers comply by filing overdue returns or agreeing to repay outstanding liabilities. Some debts have also been included in the framework for settling overdue tax liabilities, although certain repayment agreements have yet to be completed.

Debt Age Points To A Structural Problem

According to Tax Department data, the average age of immediately payable debt increased to 80.3 months, or 6.7 years, by the end of December 2025, up from 58.3 months a year earlier.

Officials caution that the figure is not fully representative because it includes substantial long-standing arrears that are now considered unlikely to be recovered. The figures illustrate the scale of Cyprus’ tax arrears challenge, with a significant share of outstanding debt dating back several years despite ongoing collection efforts and expanded enforcement powers.

Cyprus Company Registration: Two To Four Days, Unless Security Checks Intervene

Cyprus aims to register companies within two to four working days when applicants submit complete documentation. However, regulatory approvals, sanctions checks, foreign ownership and national security considerations can extend the process or prevent registration.

Energy, Commerce and Industry Minister Michael Damianou outlined the timeframe in a written response to MP Efrem Christou, who asked about company formation procedures and the checks required before approval.

Fast Registration Depends On Complete Documentation

Damianou said authorities seek to process complete applications within two to four working days, regardless of a company’s structural complexity. The timeframe also depends on whether applicants pay an additional fee for expedited processing.

According to the official incorporation requirements, the standard registration fee is €165, rising to €235 for companies without share capital. Expedited processing costs an additional €100.

Applicants must submit an approved company name, a memorandum and articles of association, and forms HE1, HE2 and HE3. Public companies must also provide form HE5.

Regulated Businesses Require Additional Approval

Companies operating in certain sectors must obtain prior clearance from the relevant authorities or professional bodies. These include medical and dental businesses, law firms, insurance and reinsurance companies, and firms supervised by the Cyprus Securities and Exchange Commission.

The Central Bank of Cyprus must also approve company names associated with payment institutions, electronic money and foreign exchange services. Additional restrictions apply to educational institutions using terms such as “university” or “college”, casino operators, broadcasters and wine producers.

Non-profit organisations seeking to register without “Limited” or “Ltd” in their names also require ministerial authorisation.

Sanctions And Foreign Ownership Trigger Extra Checks

Applications involving shareholders, directors or company secretaries subject to EU, UN or US sanctions receive additional scrutiny. Registration can proceed only if the competent sanctions authority does not prohibit it. Damianou noted that US sanctions are considered indirectly but have not been incorporated into Cyprus legislation in the same way as EU and UN restrictions.

Applications involving Turkish interests are also subject to additional review. Under procedures introduced around 20 years ago, the registrar must consult national security services before proceeding with registrations involving Turkish interests or businesses that could threaten the Republic’s security.

Damianou distinguished these cases from applications submitted by Turkish Cypriots, saying there is “no substantial difference” in how their registration documents are examined. Applications may nevertheless be refused if classified information raises concerns about national interests or national security.

Public Servants Face Separate Restrictions

Under Article 65 of the public service law, government employees cannot act as directors, company secretaries or shareholders in private or public companies without prior special permission from the finance minister.

Proposed Law Would Expand Registrar’s Powers

The government is also seeking to strengthen the Registrar of Companies’ authority to address potential security risks. An amendment to the companies law, submitted to Parliament on September 17, would allow the registrar to reject applications, refuse company filings or remove existing businesses from the register on grounds including national security, public order, public interest and the protection of state sovereignty.

The proposal, approved by the Council of Ministers on August 6, remains before the House commerce committee. It would allow authorities to withhold detailed justifications where disclosure could reveal sensitive information, while informing affected companies of the general grounds for decisions.

The bill follows parliamentary discussions about companies controlled by non-EU nationals, particularly those with Turkish ultimate beneficial owners, and possible implications for property ownership through foreign-controlled businesses. Further details are available in the proposed amendment and earlier parliamentary reporting.

Balancing Investment And Oversight

Cyprus is seeking to maintain an efficient company registration process while strengthening checks on ownership, sanctions compliance and potential security risks.

The two-to-four-day target supports the country’s appeal to entrepreneurs and international investors, but the actual timeline depends on the nature of the business, the documentation submitted and any additional regulatory or security reviews required.

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