Filenews 7 December 2025 - by Charalambos Zakos
Banks have recently been in the spotlight again, after the resumption of the debate on the taxation of their windfall profits, which arose mainly in the previous period from the increase in interest rates to tackle inflation.
The debate on the taxation of banks' windfall profits is not new, since in December 2024, a relevant law proposal was brought to the Plenary Session of the Parliament, on the initiative of AKEL, which was finally narrowly voted down.
It is important to note that the last time an extraordinary fee for banks arose was during the AKEL government, specifically in 2011, when the special tax paid by banks to this day was imposed and has become known as the "Stavrakis tax".
We are already paying, say the banks
It should be noted here that when it comes to taxing banks, two views dominate.
On the one hand, there is the view that the banks must return part of their excess profits to society, due to the special situation with what happened in Cyprus with the "haircut" and the previous support of society and citizens to financial institutions, in order to be rescued during the events of 2013 and the economic crisis that the country experienced. This is the position expressed by AKEL, which has recently started a more dynamic campaign on the issue, bringing back the relevant law proposal.
On the other hand, the banks claim that they already pay large amounts through taxes, which amount to tens of millions of euros every year. As sources from the banking sector add, this special tax is paid by banks whether they record a profit or a loss. At the same time, they argue that, due to the reductions in interest rates after the de-escalation of inflation, the data on banks' loan income will change in the coming period. In fact, the banks are reacting not only to the imposition of a new tax, but also to the special tax they have been paying since 2011, which amounts to tens of millions of euros every year.
It was imposed during the reign of Christofias
The special tax was imposed in 2011 during the government of Demetris Christofias. The Minister of Finance at the time was Charilaos Stavrakis and that is why he became known in banking circles as the "Stavrakis tax".
Specifically, the law was passed in April 2011 by the Parliament, with the aim of creating a stability reserve for the financial system. Initially the rate was close to 0.095% and later, after 2013, it increased to 0.15%, which is the current rate until today. This special tax is imposed annually on customer deposits held by banks. Essentially, it is a fee on all the deposits held by each bank, while it is important to clarify that it is not the Defense Tax that the depositor pays on the interest on his deposit, but an additional tax.
Close to €70 million a year
The "Stavrakis tax" is an additional tax and burden, with banks paying both the corporate tax and the special tax. The provision for this tax is to be paid regardless of damage or profit, while the initial thoughts spoke of a temporary measure, lasting two years. Eventually, this provision was deleted and the tax became permanent.
According to estimates, banks pay around €70 million each year in corporate and special tax.
How much did the banks give in the last five years?
As mentioned above, banks pay two taxes to the state: the corporate tax and the special tax on their deposits. The amounts vary depending on the year, based on the financial results of the financial institutions and the deposits they hold, since, as it is recalled, this tax concerns the deposits of their customers.
"F" collected some data from 2019 to 2024, which concern the payment by banks to the state of both the special tax and the corporate tax, with the amounts reaching about €600 million.
From 2019 to 2024, banks had paid €320.9 million to the state coffers as a special tax and €272.4 million as corporate tax.
Especially:
– In 2019 they had paid €60.7 million as special tax and €7.5 million as corporate tax.
– In 2020, the special tax amounted to €56.7 million and the corporate tax to €19.2 million.
– In 2021, the special tax reached €54.3 million and the corporate tax €12.2 million.
– In 2022, the special tax reached €66.4 million and the corporate tax €20.1 million.
In 2023, we see for the first time that corporate tax amounts are higher than the special tax, due to the profits that banks have started to record. The differentiation in amounts resulted in the amounts paid as taxes exceeding the average of €70 million per year by many millions in 2023 and 2024.
More specifically:
– In 2023, the special tax was €69.5 million, while the corporate tax reached €95.9 million.
– In 2024, the special tax and the corporate tax exceeded all precedents. The special tax reached €74 million and the corporate tax €117.5 million.
As banking circles commented to "F", this increase in the amounts of corporate tax reflects the increase in the revenues of the banks, therefore, with the increase in revenues, the state through the corporate tax accepts larger amounts of tax in its coffers already, without the need for additional tax. Something similar applies to the special tax on deposits, since any increase in profits and deposits automatically means an increase in the taxes that the banks will pay.
What does AKEL seek with the proposed law?
AKEL, through its new effort, proposes that a tax be imposed on the additional profit that will arise for the years 2025 and 2026, with a year of comparison in 2022, where the increase in interest rates by the European Central Bank and by extension the increase in revenues for Cypriot banks had begun. As shown by the data cited above, during the years 2023 and 2024 there is a sharp increase in the corporate tax paid by banks, which corresponds to an increase in their profits.
Essentially, if the comparison shows that in 2025 and 2026 the banks' interest profits are more than 40% of the profits of 2022, then an extraordinary fee of 20% will be imposed on the specific "excess revenues". In this way, an additional 1/5 of the banks' profits will be taxed. As provided by AKEL's proposal, the revenues from the new taxation will end up in the Fixed Fund of the Republic.
Sources from AKEL who spoke to "F" claimed that the imposition of the extraordinary fee will not affect financial stability, essentially based on a study by analysts of the European Commission that showed that the implementation of such measures will not cause problems.
On the other hand, banking circles claim that Cypriot banks are already subject to taxation that is not imposed in any other country, referring of course to the special tax that began to be applied in 2011.
However, the possibility remains open that the bill will ultimately not be implemented for 2025, even if it gathers the necessary majority in Parliament. This is because, if it is not brought to the Plenary for a vote within the next few days and before the end of the year, there can be no retroactivity of the law, so it will only apply to 2026. In such a case, AKEL appears willing to proceed with an amendment to extend the measure to 2027. It is recalled that the law proposal proposes the implementation of the emergency measure for two years, i.e. 2025 and 2026.
