Cyprus’s Tax Department ignored repeated warnings that a well-known businessman had manipulated a property sale to dodge millions in tax, the Audit Office concluded in a report published today.
The scheme, which an anonymous complaint first flagged in August 2023, involved misrepresenting the sale price of an under-construction property during transactions between 2015 and 2016 — turning what should have been a taxable profit into a paper loss that wiped out the businessman’s tax bill entirely.
The numbers tell the story. The property was originally agreed for sale in 2015 at approximately €19.35 million.
Six months later, those agreements were torn up and replaced with new ones that cut the price by €8.5 million — a 44% reduction with no logical or adequate explanation, according to the report.
The revision flipped a profit into a recorded loss of €7.7 million, which was then used to eliminate the businessman’s taxable profits for 2016.
Construction costs were inflated too, the report found, to make sure the loss would hold up on paper. The tax file put the land and construction cost for 2013 at approximately €9.3 million, but the accounts recorded €15.8 million.
By the 2016 sale, the property’s total recorded cost had reached €18.6 million — padded further by inflated capitalised interest, including interest charged during a period when construction had stalled entirely.
The Audit Office estimates the sale should have generated a profit of €7.26 million. Instead, a loss of €7.74 million was recorded.
A comparison with a similar development sharpens the picture. The property cost approximately €47.7 million in total by its completion in 2018. A comparable project by the same businessman — in the same area, of similar quality, but nearly twice the size — was finished four years later in 2022 at approximately €42.9 million, nearly €5 million less.
The report says this raises reasonable questions about whether the costs were realistic and whether the Tax Department handled them correctly.
What makes the findings more troubling is that most of these transactions were between connected parties — and the property ultimately ended up back with its original owner.
“Such transactions should, from the outset, have been treated by the Tax Department as high-risk and subject to proper tax scrutiny,” the Audit Office stated. They were not.
The Tax Department had at least four opportunities to scrutinise the case: when the property was transferred; when tax returns were filed for the companies involved; when one of those companies was drawn into a police investigation over the citizenship-by-investment scandal; and when the Tax Department received the Audit Office’s formal letter on 23 May 2025.
The report found it failed to conduct adequate investigation at any of those points. As of today, it has still not provided the Audit Office with any findings.
The Audit Office called on the Tax Department to examine the case and overhaul how it screens high-risk taxpayers, “in order to ensure compliance with applicable legislation and, by extension, to safeguard public revenues.”