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Cyprus Tax Reform Ushers In Revised Deductions And Elevated Penalties

Effective January 1, Cyprus has implemented significant changes to its tax legislation. The reform adjusts rates and deductions and imposes substantially higher penalties, signaling a robust commitment to boosting compliance and deterring evasion.

Enhanced Deterrence Measures

The revised framework significantly raises administrative fines across a wide range of activities. One of the most notable changes concerns the obligation to accept credit card payments. The penalty for non-compliance has increased to €6,000, up from €4,000 previously and €2,000 when the requirement was first introduced in 2021. The rule applies across retail, services, hospitality, and leisure sectors and forms part of broader efforts to limit undeclared transactions and protect public revenue.

Adjustments To Reporting And Submission Deadlines

Penalties for failures related to tax filings and data submissions have also been tightened. The daily fine for a continuing violation has risen from €17 to €20, while the penalty for unjustifiably omitting income from a tax return now reaches €5,000, compared with €2,000 under the previous regime. Non-compliance with invoicing and receipt requirements is subject to the same ceiling, replacing the earlier fine of €450. These measures reinforce stricter expectations around accurate reporting and documentation.

Graduated Consequences For Late Payments And Serious Breaches

A tiered penalty system now applies to late submissions. Individuals face a fine of €150, small companies with a turnover below €1 million are charged €250, and larger businesses incur a fine of €500. If deadlines set by the tax commissioner are missed, the penalties escalate further to €300, €500, or €1,000, respectively. No fine is imposed, however, when an official extension is granted, and returns along with self-assessed taxes are filed within the approved timeframe, typically by July 31 or January 31.

Strict Penalties For Serious Tax Offenses

The reform also strengthens sanctions for more serious violations. Where business premises are sealed due to breaches such as failure to issue lawful receipts or outstanding tax debts, any attempt to tamper with the seal constitutes a criminal offense. Such actions may result in fines of up to €30,000 and imprisonment of up to two years. In cases of unpaid taxes, company executives, board members, or financial officers may also be held personally liable.

Penalties linked to the extraordinary defence contribution have been significantly increased. A first conviction may lead to a fine of up to €5,000, together with payment of up to double the amount owed. A second conviction carries far heavier consequences, including fines of up to €100,000, imprisonment of up to two years, and payment of up to four times the original contribution. Offences related to defence procurement or associated financial benefits are punishable by fines of up to €30,000, rising to €100,000 when a public official or person acting on behalf of the Republic is involved.

Mercedes-Benz Posts Higher Profit Despite China Slowdown

Mercedes-Benz reported stronger-than-expected second-quarter results, lifting its shares on Tuesday despite mounting pressure from Chinese automakers and a weaker outlook for sales and revenue.

The earnings provided a boost for Europe’s auto sector, where manufacturers continue to grapple with tariffs, softer demand and intensifying competition from Chinese rivals. Volkswagen, Mercedes-Benz and BMW have all accelerated restructuring efforts in response.

Cost Discipline Lifts Quarterly Profit

Mercedes-Benz shares rose as much as 5.9% following the results before trimming gains to trade 3.5% higher by 1118 GMT. The company reaffirmed its profit margin guidance for its core passenger car business after reporting an adjusted return on sales of 4.0% for the second quarter, above market expectations and within its 3% to 5% target range.

“In an environment where some automakers are ringing alarm bells on their competitive positioning, Mercedes delivered a clear and confident message,” Morningstar analyst Rella Suskin said.

Second-quarter operating profit increased 22% to €1.5 billion ($1.7 billion), despite a 3% decline in revenue. Lower administrative and research and development costs, together with strong performances from the financial services and vans divisions, supported earnings, while the results also included a €131 million gain related to the planned sale of leasing subsidiary Athlon.

China Remains The Key Pressure Point

Despite stronger profitability, Mercedes continues to face a challenging market environment. Sales in China fell 30% during the second quarter, prompting the company to abandon earlier expectations for stable car sales and group revenue. It now expects both to decline slightly from a year earlier.

BMW also lowered its outlook in June following a deeper-than-expected slowdown in China, highlighting the pressure facing Germany’s premium carmakers. At the same time, Mercedes said Chinese manufacturers are increasingly expanding into European markets, although Chief Executive Ola Kaellenius said their focus remains on higher-volume segments rather than the premium market.

“But that is not a reason to sit back and be relaxed,” he said.

Manufacturing Shift Continues

Mercedes is also reshaping its manufacturing footprint. The company said its German factories will undergo a more aggressive push toward leaner production, although it declined to provide further details while talks with labour representatives continue. Production is also being expanded in lower-cost Eastern European locations, including Hungary, where the company is increasing capacity at its Kecskemet plant, as well as in Poland.

Chief Financial Officer Harald Wilhelm said the full-year margin for the passenger car division is expected to come in at the lower end of the company’s guidance range, reflecting a higher share of electric vehicle sales in Europe, which remain more expensive to produce and continue to weigh on profitability.

“We must continue to work flat out to reduce costs so that we can remain competitive on the prices of our products,” Kaellenius said.

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