The total amount of tax debt owed to the Cypriot government reached €4.64 billion by the end of December 2025. This represents an increase of approximately €710 million compared with the previous year, according to figures published by the Tax Department.
Notably, almost €1 billion of the total consists of relatively recent debts that have been overdue for less than one year. The authorities acknowledge that the growing level of tax arrears remains a serious challenge for the state budget, prompting a gradual tightening of tax enforcement and collection measures.
How Tax Debt Is Distributed
According to the Tax Department, the outstanding debt is divided as follows:
- €979.4 million (29.5%) — debts overdue for less than one year;
- €992.6 million (29.9%) — debts outstanding for one to four years;
- more than €1.32 billion (40%) — debts older than four years.
The average age of tax debt subject to immediate collection has increased from 58.3 months to 80.3 months, or approximately 6.7 years. However, the Tax Department notes that this figure does not fully reflect the real situation. A significant share consists of large, long-standing debts that are considered virtually uncollectible and are effectively classified as bad debt.
How Much the Government Expects to Recover
Despite the overall tax debt of €4.64 billion, only part of the amount is considered recoverable.
Of the total:
- €1.31 billion has been classified as difficult to recover;
- €3.32 billion is regarded as debt the government intends to prioritize for collection.
For comparison, at the end of 2024 the amount of such recoverable debt stood at €2.29 billion. Enforcement measures are currently being applied to debts totaling €901.5 million.
Of this amount:
- court proceedings have been initiated for debts totaling €325.9 million;
- another €575.4 million is being recovered through out-of-court procedures.
The tax authorities are using several enforcement mechanisms, including:
- registering charges (MEMO) against debtors' real estate;
- freezing funds held in bank accounts.
So far, €263,000 has already been recovered from debtors' bank accounts. Even after the application of all current enforcement measures, tax debt subject to immediate payment remains high at €2.42 billion.
In addition, the Tax Department continues to initiate criminal proceedings for the non-payment of withheld taxes, including VAT, PAYE tax, and the Special Defence Contribution, as well as for the late submission of tax returns. Some cases result in court judgments, while others are resolved through debt restructuring agreements and installment repayment plans.
Why Tax Enforcement Is Becoming Stricter in Cyprus
The tougher enforcement measures are linked to the comprehensive tax reform that came into force on January 1, 2026. It marks the first major overhaul of Cyprus' tax legislation in more than 20 years.
One of the most significant changes is the Tax Department's authority to temporarily seal commercial premises if a company's tax debt exceeds €20,000. The same measure can also be applied to businesses that fail to issue receipts or invoices to customers. From 2027, the grounds for closing businesses will become even broader, allowing the tax authorities to take the same action against companies that fail to submit mandatory tax returns.
Experts note that these expanded powers are intended to improve tax compliance and reduce the volume of overdue tax debt. For businesses and self-employed individuals, this means paying closer attention to their tax obligations, as the government continues to strengthen enforcement, automate inspections, and expand the range of debt collection tools available to the authorities.