Cyprus: Deductions and Tax Adjustments Announced

Significant changes to Cyprus’s tax system have recently been announced, aiming at modernization and reform. Specifically, the tax-free income threshold for individuals will increase from €19,500 to €20,500, with additional reliefs depending on family composition.

At the same time, corporate tax will rise from 12.5% to 15%, while the deemed dividend distribution for defense tax purposes will be abolished. Additionally, the defense tax on dividend distributions will be reduced from 17% to 5%.

President Nikos Christodoulides stated: “As part of this reform, the tax-free income threshold is increased, tax incentives are provided to young couples, the employment of more women is encouraged, and the acquisition of a first home is facilitated.”

The head of the reform project, Giorgos Syrichas, mentioned that authorities are also considering imposing an €800 fee on large businesses, as well as a property tax on high-value real estate or inactive land with significant value.

He emphasized that Cyprus’s position as a business hub will not be affected, as the corporate tax increase is accompanied by relief measures for businesses.

The goal is for the relevant bills to be passed within the year, with the reform set to take effect in 2026. Notably, there was no reference to green taxation or the new fuel taxes expected to be introduced in May.

When asked by a PEO (Pancyprian Federation of Labour) representative how the reform would benefit those already earning below the tax-free threshold, technocrats referred to the government’s welfare policies.

These changes are expected to have a significant impact on both individuals and businesses, aiming to boost economic activity and align with the modern needs of Cypriot society.

By fLEXI tEAM