The Ministry of Finance of Cyprus has submitted to Parliament a new bill aimed at eliminating schemes that allow taxpayers to hide real assets. These schemes involve situations where an individual claims to have no property or funds, yet owns shares in companies with substantial assets. The new amendments give tax authorities the right to freeze such shares if the outstanding debt exceeds €100,000. The changes are expected to provide an additional enforcement tool alongside existing mechanisms such as property seizures and bank account freezes.
The measures aim to prevent dishonest taxpayers from hiding behind corporate structures and avoiding obligations to the state. Against the backdrop of the EU’s growing demands for financial transparency, Cyprus is strengthening its legal framework to improve tax administration and combat tax evasion.
How Share Freezing Will Work Under the New Rules
According to the proposal, the Tax Commissioner will have the power to freeze shareholdings if a debt of over €100,000 remains unpaid 30 days after the due date. If the taxpayer has no property or funds that can be seized, but controls wealthy companies, freezing company shares becomes the key method of securing the debt. A decision to block shares will be made in cases where debt collection is difficult or when the debtor has a history of delays and late declarations.
The Commissioner will issue an official notice to the Registrar of Companies, and the shares will remain frozen until the debt is settled. After the freeze, the taxpayer will have 30 days to file an objection, to which the tax department must respond within a month. Once the debt is paid, the shares are unfrozen — the Commissioner must send instructions to the Registrar of Companies within 15 days. If necessary, the taxpayer may appeal to court to prove that alternative enforcement measures would cause less harm.
Transferring Property to the State as a Way to Settle Debt
The reform also introduces the option to transfer property to the state to settle debts exceeding €10,000. The decision is made by the Council of Ministers after reviewing a request submitted by the Minister of Finance. For such a transfer to proceed, the property must be free from additional burdens, and its assessed value must fall within 20% of the total debt, including penalties, interest, and fees. If the property is worth more than the debt, the difference is returned to the owner. However, if the taxpayer has a history of chronic delays, the state may temporarily hold the excess amount and use it for future obligations, returning any remaining balance only after five years. If the asset is worth less than the debt, the taxpayer must pay the difference.
Why Previous Measures Were Insufficient
Cyprus is strengthening its enforcement tools because the measures introduced back in 2014 have proven insufficient. Statistics show a significant increase in activity related to account freezes and property encumbrances in recent years.
- In 2024, the Tax Department froze bank accounts of 337 taxpayers totaling €1.39 million.
- In 2023, the amount was €141,000 across 225 individuals.
- In 2022, it reached €510,000 across 510 taxpayers.
Property encumbrances were far more substantial:
- In 2024, imposed on 5,293 owners with debts of €442 million.
- In 2023, imposed on 5,841 individuals totaling €647.6 million.
- In 2022, imposed on 820 debtors with €44 million owed.
New Measures and Their Impact on Tax Discipline
All these changes aim to increase transparency and strengthen taxpayer discipline.
Cyprus seeks to reinforce its reputation as a jurisdiction aligned with European standards and actively combating tax evasion. Amid rising economic activity, digital transformation reforms, and plans to modernize the tax service, the new rules will allow the state to collect taxes more effectively and prevent the misuse of corporate structures.