Filenews 30 October 2025 - by Eleftheria Paizanou
The 33 changes and the write-offs of some "problematic" provisions, which the Ministry of Finance proceeded with in the legislative package for the tax reform, are estimated to "push" to its approval by the Parliament, without delays and reversals.
Government circles, speaking to "F", said that safeguards have been included in the bills, which shield on the one hand a new efficient tax system that will safeguard public finances and on the other hand provide the required support to taxpayers and businesses. The amendments had been made possible in the context of the consultations that the Tax Commissioner had with the bodies involved.
Yesterday, the Council of Ministers gave the green light to the six bills of the tax reform, which will be fiscally neutral. In fact, due to the many tax deductions granted to the income tax of thousands of taxpayers and the reduction of the tax burden on businesses, the measures to combat tax evasion, as well as to improve tax compliance and collectability of the Tax Department, balance the loss of revenue.
The new tax reform comes 22 years after the last change in the country's tax system and aims at a fairer distribution of the tax burden, the strengthening of the low income strata and the middle class, the strengthening of the growth prospects of businesses, as well as the maintenance of the resilience and growth of the economy. Now, the battle is transferred to the Parliament, as the bills will be submitted to the Plenary Session of the House today. Their discussion in the Finance Committee will begin around the end of November.
The bills
"F" presents the basic parameters of the six bills, as they were formulated in the last few days and will be submitted today to the Parliament.
Specifically, for natural persons, income taxation will be done according to the composition of the family and income, while the tax-free allowance for all increases. In detail, the measures are as follows:
- Increase of the tax-free allowance to €20,500 and expansion of tax scales.
From €20,501 to €30,000 Income will be taxed at 20%. Incomes from €30,001 – €40,000 will be taxed at 25%. Incomes from €40,001 to €80,000 will be taxed at 30% and incomes over €80,000 will be taxed at 35% - Additional tax exemptions are provided for on the basis of family composition. Households with an annual gross income of €80,000 are covered, while for large families the income should be up to €100,000.
In detail, the tax deductions that will be given are as follows:
-€1,000 discount per year for each spouse/cohabitant/single person for each dependent child and student. Single-parent families will receive a discount of €2,000/year.
-€1,500 discount per year for each spouse/cohabitant/single for interest on a performing loan for the purchase of a main residence or for the expense of rent of a main residence in the Republic.
-€1,000 discount per year for each spouse/cohabitant/single person for capital expenditure for energy upgrade of the main residence and for electric vehicles. The exemption will be carried over to the next 4 years.
Measures for businesses
For businesses, 14 measures were included in the tax reform, which are as follows:
- Abolition of the deemed distribution of dividends (17% of 70% of profits) as of 1/1/26. Profits for tax years up to 2025 will be subject to an accountable dividend distribution.
- The actually distributed dividends from 1/1/2026 will be taxed at a rate of 5%.
- Increase in corporate tax from 12.5% which is currently to 15%.
- The Non-Domicile framework for natural persons is maintained for 17 years. After the age of 17, there is an option to extend for 5+5 years with a lump sum payment of €250,000 for the five-year period.
- The carry-forward of losses to the following years is extended, from 5 to 7.
- The special way of taxing insurance companies for the life sector (request of insurance companies) is abolished.
- A special way of taxation (horizontal 8%) on stock options based on an approved plan is introduced.
- A special way of taxing profits from transactions in the disposal of crypto-assets (horizontal 8%) is introduced.
- A special way of taxing gratuitous payments by an employer upon termination of employment is introduced: a rate of 20% and a tax-free amount of €200,000.
- The stamp duty is simplified, so that stamp duty is imposed only on transactions for: transfer of immovable property, insurance contracts and financial transactions.
- The extraordinary defense levy imposed on rental income is abolished.
- Adjustment of lifetime exemptions on capital gains taxes? The general exemption from the current €17,086 is increased to €20,000. The exemption for agricultural land from the current €25,629 is increased to €30,000. The main residence exemption: from €85,430 to €100,000.
What came out of the bills
"F" also reveals the hot provisions that have been removed or amended from the bills. Specifically, the following provisions have been DELETED:
- A natural person will be considered a tax resident of the Republic (regardless of the days of his/her stay in the Republic per tax year) if he/she maintains the center of his/her main business and/or economic interests in the Republic.
-Adjustment of the remuneration of company directors and employees.
-The taxation as a natural person instead of a legal one of the amount of the company's remuneration from the provision of the services of a director or consultant to another company to the director or consultant (removal of the corporate veil). - The condition that in order for expenses to be deductible from taxable income, they must also be necessary for the acquisition of the income.
- The restriction that would be applied to related persons, when they claimed the 20% super discount for research and development expenses, when combined with the IP regime.
-The reference in the legislation on the Capital Gains Tax, that the reduction of the percentage of ownership of shares of companies that owns real estate, constitutes a disposition.
The amendments
Among the many changes made is the clarification that the sealing (suspension of operation) of businesses with tax pending issues will be done after 3 written notices to the taxpayer, without the issuance of the relevant decree.
It was finally determined that the interest income of an individual (natural person), any provident fund, state organizations, local government authority and General Government entities is exempt from income tax and is subject only to an extraordinary defense contribution.
Also, a grace period of 5 years was given, therefore from 1/1/2031 the profit from the redemption of a share or share in a collective investment plan of open or closed type will be subject to taxation. A discount of up to €300,000 per three years was granted, for expenses for the first listing of shares on a recognized Stock Exchange.
The tax-free amount has been increased from €20,000 to €200,000 received by an individual as a gratuitous payment, compensation or other benefit. A provision has been added so that the expense paid to an individual (employee or director) as a gratuitous payment, compensation or for another benefit is deducted from taxable income.
At the same time, the limit for entertainment expenses was increased from €17,086 to €30,000 deductible on taxable income. The deduction on the taxable income of natural persons has been extended, for premiums beyond life insurance and to permanent or partial disability. Insurance premiums against natural disaster risks of up to €500 are granted as a discount on a person's taxable income. There were other changes in provisions in the bills.
The battle in Parliament
The Ministry of Finance will have to race to convince the parties to approve the bills without many changes and at the same time to approve the tax-reform in its entirety in December. Due to the delay in the submission of the bills, DISY, DIKO and EDEK are in favour of the idea of approving the reform in two instalments, with the Government demanding that it be voted on in its entirety in order to be implemented uniformly.
