Filenews 10 December 2025 - by Eleftheria Paizanou
The formula agreed yesterday between Finance Minister Makis Keravnos and the co-ruling parties DIKO and DIPA as well as DISY for the tax reform is characterized as a win-win conciliation.
On the one hand, the Government secured the required majority for a tax reform that satisfies it in most respects to be approved without problems and unwanted amendments, while the parties of the coalition, together with DISY, won the right to present yesterday's final touches, which favour many tens of thousands of citizens, as their own initiative, with the corresponding political benefit, in the midst of an election campaign. For the coalition, it is the second government pass, after the recent reshuffle and the ministership of its first-class executives, with the exception of EDEK.
After yesterday's development, which Fileleftheros foreshadowed with yesterday's report in a position of main issue, it is considered a given that from January 1, 2026, the tax reform will come into force.
Most - and most important - changes agreed yesterday with the Minister of Finance will be incorporated into the bills through party amendments and not through differentiated bills by the Government. The only change that will come immediately from the government side will be the one concerning the tax relief of some groups of taxpayers with a family income of up to €90,000, instead of up to €80,000 that is currently provided for in the relevant bill. The agreed changes are estimated to entail a budgetary cost of €110 million per year.
What was agreed
The give-and-take between the Government and the parties began last Monday in Parliament and continued during yesterday's meeting at the Ministry of Finance, to seal the following agreement:
- The tax-free allowance will increase from €20,500 proposed today by the Government to €22,000. That is, €1,500 more than the original plan. The opening of the tax-free gap increases the cost for the state by €45 million. Today the tax-free allowance is €19,500
- The ceiling of annual incomes for tax relief - depending on the number of children - is being increased and will rise gradually. With the differentiation of the income criteria, the number of beneficiaries who will benefit from the additional tax deductions is expanded. In detail, according to information from "F", for a family with one child, the annual family income that will allow a tax deduction rises to €90,000. For two children, the annual family income rises to €100,000. Also, for a family with three or four children, the amount of annual income rises to €150,000 while the ceiling rises to €200,000 for large families, with more than five children.
- The amount of tax deductions that will be granted for children and students of a family (up to 23 years old for women and up to 24 for men), which will be calculated in stages, is increased. Specifically, for a family with one child, the tax deduction remains at €1000, as provided for in the government bill. For a family with two children, the tax deduction increases to €1250 for each child. For a family with more than three children, the discount will be in the order of €1500 for each child.
- The discount for interest rises to €2000, which will be granted for performing mortgages and for rents. The original bill provided for a discount of €1500 for this category. The discount for green investments in homes and for the purchase of an electric vehicle remains at €1000.
- Tax scales are changing. For incomes from €22,001 to €32,000 the tax will be 20%. Incomes from €32,001 to €42,000 will be taxed at 25%. Annual earnings from €42,001 to €72,000 the tax rate will be 30%. Income over €72,001 will be subject to 35% taxation. It is recalled that the bills provided for an increase in the tax-free allowance to €20,500 and an expansion of the tax scales. From €20,501 to €30,000 Income would be taxed at 20%. Incomes from €30,001 – €40,000 would be taxed at 25%. Incomes from €40,001 to €80,000 would be taxed at 30% and incomes over €80,000 would be taxed at 35%.
With the party amendments, in some cases, for thousands of taxpayers, the commitment given before the elections by the President of the Republic to increase the tax-free allowance to €24,000 will be satisfied (through the discounts).
At the same time, the parties will also submit an amendment to abolish the stamp duty, from which the state currently collects €35 million, while the Government's proposal provided for revenues of €20 million.
Measures against tax evasion
Of course, the Government sets terms and conditions for the changes. Specifically, a prerequisite for the Ministry of Finance to accept the amendments is that the parties do not "tamper", i.e. not weaken at all, the measures against tax evasion and the anti-abusive clauses included in the bills.
Already, the government proposals have been enriched with safeguards, for specific tools that the Tax Department will have at its disposal and concern the sealing of businesses with tax arrears, the blocking of shares for debts over €100,000 etc.
Yesterday, Finance Minister Makis Keravnos said that the ministry will accept an increase in the tax-free allowance and the gradual increase in income criteria, adding that "especially for five children and above, the limit for relief up to €200,000 is increased". He also said that they agreed with the parties to abolish the stamp duty. "There was a great convergence of views and I expect that within these margins accepted by the Government, amendments will be submitted by the parties to proceed with tax reform," he added. He assured that the changes are within the fiscal capabilities of the state.
Party consensus
The president of the Finance Committee and deputy president of DIKO, Christiana Erotokritou, said that she welcomed the positive attitude of the Minister of Finance to the amendments that will be submitted by the parties, adding that DIKO seeks consensus and cooperation on issues of the economy. Concluding, he said that the tax reform will continue to be an attractive business center.
For his part, DISY MP Onurfios Koullas stated that in order to have a positive result for Cyprus, there needs to be a majority in Parliament and the consent of the government. "We are moving in a common direction for the good of the economy, improvements for citizens with priorities to support the middle class, families with students and to maintain a favourable business environment," he added.
DIPA MP Alekos Tryfonidis noted that there was convergence on the amendments, which will help the low-paid, middle class, low-pensioners, single parents and generally support businesses." As he said, the amendments are within the fiscal framework and do not endanger the country's economy.
Surprise and discomfort from the rest
The alliance of DISY, DIKO, DIPA - and EDEK - caused the surprise and discomfort of the other parliamentary parties, as they considered that their amendments were moving in the same direction. AKEL party officials expressed their discomfort because they were left out of the meeting. As we were told, the common formula that some parties came up with yesterday with Mr. Keravnos also approaches his own amendments.
ELAM MP Sotiris Ioannou told "F" that the amendments accepted by the Government were put to the minister by ELAM last September. As he said, they had proposed a gradual increase in the ceiling of the annual income but also the gradual granting of a discount, depending on the number of children.
The president of the Ecologists, Stavros Papadouris, also expressed his strong dissatisfaction, describing it as an impropriety not to invite all parties to yesterday's meeting. He also said that many of the proposals that were agreed upon had also been proposed by the movement.
On the part of the Ministry of Finance, we were told that yesterday's meeting did not take place on the initiative of the competent minister but on the initiative of the parties that participated in the meeting.
