Filenews 25 June 2025 - by Eleftheria Paizanou
With the return of MPs to the parliamentary benches after the summer holidays, the discussion of the package of legislation on tax reform will begin, so that they can be voted on time and implemented on January 1, 2026.
Something that the President of the Republic, Nikos Christodoulides, reiterated yesterday during the meeting on the tax transformation. Yesterday's meeting, which was attended by the Minister of Finance Makis Keravnos, the Commissioner of Taxation Sotiris Markidis and a team from the Centre for Economic Research (KOE) of the University of Cyprus, who prepared the guidelines of the reform, was the last one, as all open issues were closed.
The technocrats of the Department of Taxation and the Ministry of Finance informed President Christodoulides that the preparation of the legislation, which will soon be put up for public consultation, is almost complete. At the same time, some outstanding issues were specified and there were some clarifications, which, however, do not alter the philosophy of tax transformation.
The philosophy does not change
Tax reform, as the Government has repeatedly argued, ensures a fairer distribution of income, reduces social inequalities and strengthens economic and social cohesion in Cyprus.
In addition, it is estimated that with the facelift that will take place in the tax system, it will become more efficient, fairer and adapted to modern challenges and needs. After the completion of the bills, they will be put to a public consultation for three weeks, during which interested parties will be able to submit their suggestions and comments.
Subsequently, the legislation will be taken to the Legal Service for legal and technical review. A government source told "F" that the package of legislation is estimated to be approved by the Council of Ministers between July and August and then forwarded to the Parliament. However, these will formally be submitted to Parliament in September, when Parliament resumes its work.
He will inform party leaders
In the meantime, and specifically in July, the President of the Republic and the Minister of Finance, in a meeting with the leaders of the parties at the Presidential Palace, will inform them about the details of the legislation. The goal, as we have been told, is to remove possible reservations, so that the discussion of the bills can take place at a rapid pace in Parliament.
"So, all the issues we have before us are over, I want to be informed about the preparation of the bills, so that we can proceed at the level of the National Council. Together with the Minister of Finance, we will make a final briefing to the parties and it will be sent to the Parliament, because it will be put into operation on 1/1/2026. And I do not accept any deviation from the date I mentioned above, 1/1/2026," President Christodoulides stressed yesterday.
Concern about reactions
What worries the Members of Parliament is that the Finance Committee of the Parliament will once again be transformed into a place for consultation and conflict of interest, given the reactions that representatives of the professional bodies have expressed from time to time.
Parliamentary circles say that they will not accept a public consultation in the competent committee, as this should have already been completed a long time ago by the Government.
However, stakeholders claim that the views and suggestions they submitted in the context of the reform were not taken into account, while not enough time was spent informing them. Something that is rejected by the Government, which maintains that there has been adequate consultation.
The bills and the changes that are coming
Among other things, the bills provide for an increase in tax-free income to €20,500 from €19,500 (an increase of €1000), a differentiation of tax scales and a transfer of the maximum tax rate of 35% to taxable income of more than €80,000.
The tax scales and tax rates are differentiated as follows:
Specifically, for annual incomes up to €20,500 no tax will be imposed, from €20,501-€30,000 the tax will be 20% and for incomes from €30,001 to €40,000 the tax rate will be 25%. For incomes from €40,001 to €80,000 a tax of 30% will be imposed and for incomes over €80,000 the tax will be 35%.
At the same time, depending on the income of the households, tax deductions will also be granted, based on the income criterion of the total gross income of the household with two working partners or spouses up to €80,000. €1000 for each child, €1000 for each student, €1500 for instalments of a serviced housing loan and €1000 for a green upgrade of a first home.
As far as the changes in companies are concerned, bills will be prepared that will increase the corporate tax from 12.5% to 15%. It will also provide for the abolition of the estimated distribution of dividends and the reduction of the withholding tax on the distribution of actual dividends to 5%.
