Expats in Cyprus Face Tax Levy on Their Savings

Expats face large levies on their savings in Cyprus

Any expatriates with savings in a Cyprus bank have been warned that they may lose up to 9.9% of their savings after a bailout agreement was agreed with European finance ministers in Brussels on Saturday.

If current plans proceed, anyone who holds savings in Cyprus banks will be required to pay a tax of up to 9.9% on their savings, regardless of whether they are Cyprian nationals or expats. It is hoped that the charge will raise 6bn euros that will help the indebted European country to meet the requirements of a 10bn loan from EU finance ministers. It is anticipated that those who have savings in excess of 100,000 euros will pay a levy of 9.9% of the total value of their savings, while those with less will be charged 6.7%. Analysts estimate that more than a third of the cash currently held in banks in Cyprus belong to people who are non-permanent residents in the country, including the area’s large expat population.

Discussing the plans to charge bank account holders, Cyprus’ finance minister Dimitris Sarris said in a statement: “We had to make some very painful decisions – and I believe that looking at the benefit of Cypriots and all the depositors of this age and the next, we took the less painful one.

“The problem of Cyprus is different to the other countries that are under the support of Europe. It’s to do with the magnitude of the bank system and the danger that exists from the effort that Europe demands from us to do to in order to reduce the cost of the adaption of the new situation.”

The weekend has seen queues of furious expatriates queuing at cash points in an attempt to remove their cash from the banks before the charge was levied. Many banks were forced to shut their doors and while some savers did manage to withdraw large amounts of money, the banks did place a stop on electronic transfers.

Expatriates throughout the island have reacted with shock. Shirley Brooks, 61, originally from Manchester, told UK newspaper The Daily Mail: “I am extremely angry. This is our retirement money, and there was no warning that this was coming. I don’t think we should have to pay anything as we did not cause the problems in the economy.”

Fiona Mullen, an economist living on the island, told BBC News: “We knew there was a possibility they would take the deposits above the insured threshold – so above 100,000 euros – but nobody thought they would take it down to someone with five euros in the bank.

“I was trying to take money out of the ATM [on Saturday] but I couldn’t.”

Elsewhere people have raised concerns about the ethnic repercussions of levying citizen’s bank savings and many analysts predict that the decision to tax Cypriot citizens may lead to a run on the banks throughout Europe. One person wrote on Twitter: “The Cyprus deal is exactly why I don’t keep money in the bank anymore. Brussels can commandeer your cash. Just like that,”

Discussing the plans, Nicholas Papadopoulos, head of parliament’s Financial Affairs Committee, said: “My initial reaction is one of shock.

“This decision is much worse than what we expected and contrary to what the government was assuring us, right up until last night.”

Dutch finance minister Jeroen Dijsselbloem said: “As it is a contribution to the financial stability of Cyprus, it seems ‘just’ to ask a contribution of all deposit-holders.” French finance minister Pierre Moscovici added: “We did what we had to.”