Filenews 19 July 2025 - by Eleftheria Paizanou
The Government is closer to the start of the implementation of the tax reform – as the President of the Republic wants from January 1, 2026 – as yesterday it put up for public consultation the six bills that will turn the taxation of natural and legal persons upside down.
Stakeholders will be able to submit their comments on the bills until August 25, so that they can be studied and submitted to the Parliament in September.
According to a relevant announcement, tax reform is one of the most crucial pillars for the Government for the formation of a fair, efficient and sustainable economic system.
As pointed out in the announcement, the aim of the tax reform is not only to preserve public revenues, but to ensure social justice, strengthen entrepreneurship and combat tax evasion. Through the proper implementation of reform measures, the Government seeks to upgrade the way the tax mechanism operates, enhancing citizens' confidence and the stability of the economy.
During the first analysis of the bills that "F" proceeded with, it is clear that in addition to the changes that have been announced so far in relation to the increase in the tax-free rate, the change of tax scales and the granting of tax deductions, the Tax Department is also given weapons to hunt down tax evaders.
Among other things, it provides for the freezing of shares, the sealing of businesses, the possibility for debtors to cede their property to the state for the payment of their tax debts and the monetary fines are increased.
Discounts for taxpayers
In detail, the bills provide for the following:
With the amendment of the Law on Income Taxation, it is provided that for the purposes of calculating the taxable income of a person who is a resident of the Republic, discounts will be granted, provided that the family income does not exceed €80,000 and in the case of a single person does not exceed €40,000.
Specifically, for each dependent child, each parent will receive a €1000 discount, while in the case of a single-parent family or in the case of parents who are not spouses or cohabitants and one parent has full custody of the dependent children, a discount of €2,000 per dependent child is granted to the parent who has custody, excluding the student, and no discount is granted to the parent who does not have custody.
A tax deduction of €1000 for each student will be received by parents (€1000 each) who are not spouses. In addition, each spouse or cohabitant or single person will receive a tax deduction of €1500 for the tonnes paid in relation to a serviced housing loan within the Republic or to cover the cost of rent paid in relation to the use of a main residence.
The tax deductions will be granted to taxpayers whose permanent residence is in the Republic, the loan is in a bank in Cyprus and they do not have another residence in the country. It is noted that the tax deduction will be reduced if the taxpayer receives any other sponsorship from the state.
An additional tax deduction of up to €1000 will be received by every taxpayer for spending on the energy efficiency of the main residence, RES systems and electric vehicles.
The tax scales are also changing, according to which no tax will be imposed for annual incomes up to €20,500, 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 30% tax will be imposed and for incomes over €80,000 the tax will be 35%.
The bill provides for a tax on profits from cryptocurrencies. The granting of incentives for the provision of shares by employers to employees. At the same time, the corporate tax is increased to 15%.
Abolition of the defence levy
The draft law on the Extraordinary Contribution for Defence – Abolition of the Extraordinary Defence Contribution, provides for the abolition of the Extraordinary Defence Contribution. It provides for the abolition of the estimated distribution of dividends and the reduction of the withholding tax on the distribution of actual dividends to 5%. Moreover, the Capital Gains Bill provides for the non-payment of capital gains tax for the consideration of immovable property.
Increase in the tax-free allowance
The bill on Tax Certification and Collection provides that natural and legal persons with an annual income of €20,500 are obliged to submit a tax return. Therefore, the current tax-free allowance is increased by €1000. At the same time, the Council of Ministers, by decree, will be able to determine specific categories of taxpayers (natural persons) who will be exempt from the obligation to submit an income tax return.
Under the bill, taxpayers will be obliged to keep any documents and information included in the return for a period of eight years. In addition, a taxpayer who submits his tax return 30 days before the deadline will be granted a €10 tax credit.
At the same time, taxpayers have the obligation to register in the tax register in order to obtain a tax identification number. In addition, financial institutions and credit acquisition companies will submit information and data to the Tax Commissioner for taxpayers, upon request.
It will seal premises
At the same time, the Tax Department will be able to seal business premises, in case they do not pay their taxes, issued inaccurate invoices and receipts and did not proceed with their issuance for transactions over €500.
In addition, businesses will be sealed when tax control is obstructed by the use of force or threat. In this case, the judge will issue orders suspending and sealing the business for 48 hours.
It is noted that the businesses that will be sealed will be sealed. In addition, employers will have to submit a declaration of withholding taxes and contributions for each employee every month. A new article has been added to the law, which will allow the Tax Commissioner to register an indictment before the District Court for tax offences against interested persons through an electronic system. The bill also increases administrative fines, in some cases up to three times. It also includes injunctions for the taxable salaries of directors.
Share freeze and real estate exchange
The Tax Collection Bill provides that in case any person refuses, delays or neglects to pay to the Tax Commissioner the tax due, which exceeds €3,000. For more than 30 days from the day it is payable, the taxpayer's shares will be handed over and the state will be able to receive his property.
That is, according to the bill, the Tax Commissioner can proceed to the commitment of the debtor's ownership to shares of legal entities. At the same time, the freezing of the shares will act as a guarantee for the payment of the tax due by depositing a note to the Registrar of Companies signed by the Registrar of Taxation claiming that the interest of the specific person in the shares remains bound for the payment of the tax due.
The shares will not be transferable as long as they are reserved. According to the bill, the debtor can either submit an objection to the Registrar for a review of the commitment or submit an application to the Court for the lifting of the commitment.
During the period of validity of the registration of the commitment, the tax and other obligations of the person that may arise from the holding of the shares continue to exist. The bill also provides for stricter measures, according to which if the tax debt exceeds €10,000, the Minister of Finance, upon application submitted to him or a person authorized by him, and following a proposal by the Commissioner of Taxation and a decision of the Council of Ministers, can accept the transfer of a property for the benefit of the Republic against the debts.
As noted, the procedure for accepting the transfer of a property for the benefit of the Republic against debts is promoted when the determined value of the property does not deviate by more than 20% from the amount of tax due or any other amount of additional tax, monetary charges and interest.
Finally, with the bill amending the Law on Stamps, the relevant fees are differentiated, with a minimum value of €5 and a maximum stamp value of €20,000.
