Filenews 9 August 2024 - by Eleftheria Paizanou
Work is ongoing on the preparation of the study of the Centre for Economic Research of the University of Cyprus on tax reform. It is estimated that after the summer holidays the study will be concretized and the examination of the positions submitted by the affected bodies in the context of the social dialogue will be completed.
It is worth noting that in the first half of next year, it is estimated that the procedures in progress will be completed, with the aim of submitting to Parliament the changes to the legal framework.
The tax reform aims to increase employment and competitiveness of the Cypriot economy, within the framework of international and European standards. It also aims to promote innovation and the green transition with evolutionary perspectives, as well as a fairer distribution of the tax burden, preserving the sustainability of public finances, through a simplified tax system.
Bills for the imposition of green taxation, also known as a carbon tax, are expected to be submitted and approved by Parliament beforehand, along with compensatory measures that will try to balance the impact on taxpayers.
It is recalled that the green tax is a prerequisite for the disbursement of the next tranche from the Recovery Fund. In recent years, the Ministry of Finance, until the full implementation of the tax reform, proceeds to amend the laws. Last year, nine legislative changes were made, which helped improve the legal framework for compliance and uniformity purposes.
In detail, within the framework of the general tax policy of the state and the harmonization/modernization of direct tax and VAT legislation, the following amendments were made to the legislation:
– the 50% exemption framework on remuneration for starting employment in Cyprus has been extended, so that the granting of the exemption is not terminated in case of change of employment.
– the framework for granting a tax deduction for investments in innovative companies has been extended until 31 December 2026
– the framework of tax relief for loan restructurings has been extended to cases of disposal and transfer of immovable property to KEDIPES carried out under the "Rent for Instalment" scheme
-The instalments for the payment of the special defense levy withheld on rents were reduced to two, to simplify the process
– Reduction of the payment of the special defence contribution from 30% to 17% in respect of interest received or credited. In addition, the levy of such a levy on interest paid on compensation for disability or serious bodily injury or death was abolished.
– KEDIPES was exempted from the obligation to pay an extraordinary defence levy on the rents it will receive from the state under the "Rent for Instalment" scheme.
– The application of the tax relief framework for loan restructurings aimed at reducing or repaying credit facilities or loans or debts given to borrowers by lenders has been extended for another year, namely until 31/12/2024.
– Changes were made to the VAT law, decrees were issued and several notices were published.
A series of changes were made this year to other tax laws, while others are expected to follow.
