Filenews 25 September 2025 - by Eleftheria Paizanou
The six bills for tax reform have taken the path of the Legal Service, after the processing that took place in the Ministry of Finance after the public consultation that preceded it was completed.
The Legal Service will sift through the legislation to determine whether they are in line with the Constitution, the European acquis and domestic laws.
The goal is for the legislative review to be completed in the next few weeks, so that the bills can be submitted to the Parliament as soon as possible. The amended texts of the bills have also included the new provisions that have been agreed in the context of the meetings of the Tax Commissioner with organized groups and professional associations.
Among other things, safeguards have been included for the sealing of businesses and for overpowers of the Tax Commissioner, some provisions have been frozen and some others have been improved, raising the ceilings of amounts and incomes.
What changed in the bills
According to information from "F", the changes made concern:
– The increase of the income ceiling to €100,000 for large families, to investigate the number of beneficiaries who will receive tax deductions.
– A provision has been added according to which those taxpayers who insure their home or holiday home against fire will be entitled to a discount. Essentially, they will be added to the increase in their tax-free income.
– Also, the first €100,000 of the gratuitous allowances (bonuses) that employees will receive through the voluntary redundancy plans, a 20% tax will be imposed on the remainder of the compensation. It is worth noting that the original text of the bill provided for the taxation of bonuses from the first €20,000.
– At the same time, the amount of tax debts was increased, which, when ascertained, will lead to a blocking of shares. Specifically, the Tax Department will proceed with the blocking of shares for debts over €100,000.
– The bill has included additional safeguards for the sealing of business premises due to the non-issuance of receipts and maintenance of tax debts, additional safeguards have been included. Specifically, the sealing (suspension of operation) will be done after a court order and at the same time additional provisions will be introduced in the bills for three written warnings, with at least 10 days per notice, for the offender to comply, before a court order is issued.
– Regarding the determination of the salaries of corporate executives by the Tax Commissioner for tax purposes, in 2028 a specific mechanism will be implemented. For the tax years 2026-2027, the remuneration of corporate executives will not be lower than the higher amount of remuneration in 2024 and the insurable remuneration that was in force in the tax year.
– For Intellectual Property issues, a 20% super-discount will be given for research expenses to be carried out, whether the expenses are related to related persons or unrelated persons. At the same time, capital discounts will be granted on the market value of the assets contributed to a company to a shareholder.
– Regarding the extension of the non-domicile regime, a new provision has been added to the bills for the payment of a lump sum in advance without the right to return every five years amounting to €250,000 from €1.25 mil.
Voices from Parliament
However, the delay observed on the part of the government leads DISY, DIKO and EDEK to insist on the approval of the reform in two instalments, so that the controversial provisions concerning the fight against tax evasion can be transferred to the new year, to be discussed in detail.
There are strong reactions to these provisions, especially among accountants and lawyers, who, with more than 420 comments submitted, demand that they be examined in depth so as not to affect the competitiveness of Cyprus.
The two instalments and the opinion on transitional
The Government disagrees with the approval of the reform in instalments, assuring that within October the legislation will be before the Legislative Body. In fact, it is also waiting for the opinion of the Legal Service, in relation to the implementation of transitional provisions in the reform.
That is, they expect to receive an answer if it is in line with the Constitution to approve all bills in their entirety by the first quarter of the year, however, taxation should start at the beginning of the year.
Legal circles, speaking to "F", consider that it is unconstitutional in matters of taxation to apply them with transitional provisions. The taxation affected in the event of its transitional application is the increase in corporate tax from 12.5% to 15%.
