Cyprus intends to boost liquidity of the national financial system by introducing a tax amnesty encouraging taxpayers to bring back any funds hidden overseas.
The new legislation is being drafted to introduce a tax amnesty on the repatriation of any assets and funds hidden abroad by national taxpayers.
Under the tax amnesty program, which would last until 31 December 2013, national taxpayers will be pardoned for any income taxes owed on the undeclared funds hidden abroad, if their cash is repatriated for immediate investment, repayment of debt to the state or banks, making a bank deposit for at least five years, or purchasing government bonds.
Haris Georgiades, Cyprus finance minister, said: "Cyprus hopes to convince depositors in foreign banks to repatriate their money by offering them a tax amnesty over the next five months.
"We are opening a window to facilitate the inflow of capital in the real economy and encourage investment in a very concrete way," Georgiades added.
Christos Stylianides, a government spokesman, said: "It will not be a blanket amnesty, because the government is very sensitive to issues of tax evasion.
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"We are in a very difficult economic condition and the economy is in need of liquidity, but on the other hand fighting tax evasion is an equally important target for the government," Stylianides added.
Stylianides stated that all those that are granted taxation amnesty would be exempted from income tax and there will be specific conditions for someone to become eligible for tax exemption.
Stylianides said that no firm estimates have been made yet as to the amount the government expects to be repatriated, as this will depend on the actual provisions of the legislation.