Filenews 18 June 2025 - by Eleftheria Paizanou
Together with the tax reform bills, changes to the legislation will be promoted and measures to tackle tax evasion will be incorporated. According to information from "F", the measures that are being worked on will broaden the tax base, combat tax evasion and strengthen the collection of the Tax Department. Technocrats are looking at the models that other countries are applying to tackle tax evasion. One of the scenarios under consideration (no decision was taken) is for the Tax Department to put a lock on businesses that do not issue legal receipts and invoices. This is a strict measure applied in Greece, according to which if businesses are found to be repeatedly violating the law in relation to receipts and invoices, they are stamped by the tax authorities. The proposal under preparation will be on the model of Greece.
Criminalization of non-payment of tax
Another measure that the technocrats are considering is the criminalization of non-payment of income tax. For the first time, this measure was put in place by the troika in 2012 in the framework of the fiscal consolidation memorandum. In fact, in 2013 it was decided that there will be criminal liability of the directors of companies, only in case of fraud or in case where the legal entity has tax collections or withholdings on behalf of the Republic. In the end, the measure did not proceed and was reinstated a few years later with a bill submitted to the Parliament. However, there were strong reactions from the stakeholders who had argued that this measure would prevent foreign companies from investing in Cyprus. After the reactions, the Ministry of Finance had withdrawn the bill, resulting in it being put in the drawers.
Fines increase
At the same time, the increase in fines and other penalties for violations of tax legislation is also being considered. For example, if today either a natural or legal person does not submit the tax return, a fine of €100 is imposed, an amount that is considered low especially for businesses. What is being considered is the tripling in some cases of the amount of financial penalties. The specific measures have not yet been finalized, as they will go through further control and there will be consultations.
In the final stage
At the same time, the preparation of the tax reform bills is in the final stage. Due to the many changes that are being promoted, some legislation may include up to 50 amendments. The bills will amend the tax scales, increase tax-free income, grant tax deductions due to family composition, housing loans and the green upgrade of homes, as well as tax changes for businesses. The tax transformation will reduce the tax burden for households and businesses, strengthen competitiveness and provide incentives for business development. Among other things, the reform bills will provide for an increase in tax-free income for individuals to €20,500 from €19,500 (an increase of €1000), a diversification of tax scales and a transfer of the maximum tax rate of 35% to taxable income of more than €80,000.
To be implemented in 2026
According to information, by the end of the month, the Government aims to have the bills ready, which it will put forward for three weeks for public consultation, during which the stakeholders will submit their views. Some associations have already forwarded their proposals to the Centre for Economic Research of the University of Cyprus, which prepared the reform, but there are reactions from some that their positions have not been heard. The government aims to implement the new legal framework of the reform on January 1, 2026.
