The Tax Department has put an end to exemptions provided to community leaders in Cyprus over the past decades. In addition, they will now have to pay retrospective tax on income received from community services rendered, according to a circular signed by Tax Commissioner Yiannis Tsangaris.
This mean that all earnings by community leader, including benefits for secretarial services, representation and hospitality will now be subject to income tax.
The circular clearly says: “whereas Article 18 of the 2013 Budget Law provides that, irrespective of the provisions of any other law or regulation, the benefits of secretarial services, representation and hospitality are subject to income tax, circular 1997/10 shall apply until fiscal year 2012.” At the same time, the circular indicates that “as from fiscal year 2013, compensation received by the mayors is subject to income tax in its entirety.”
The decision for benefits received by community leaders for services rendered to be taxed was decided back in November 1997. At that time, the Union of the Communities of Cyprus had submitted a list of expenses by community leaders while carrying out their duties. And following negotiations, it was decided that the percentage of expenses to be deducted from their compensations would be 50%.
This tax policy was in force up until fiscal tax year 1991. Community leader were not receiving benefits up until 1990, but were charging fees for each service rendered. In fact, the taxation process applied to community leaders who were not within municipal boundaries was the same as that for self-employed in Cyprus.