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Revolutionary Tax Reform Sets the Stage for Economic Resilience

In a landmark decision, the Parliament has approved a comprehensive tax reform designed to forge a fairer, more modern, and competitive fiscal system. In a televised address, Nikos Christodoulidis announced that the transformation will substantially reduce the tax burden and enhance disposable income for citizens.

Clear Government Strategy and Vision

The Head of State underscored that, from day one in office, the administration has pursued a meticulously crafted plan with explicit priorities and a robust ideological framework rooted in social liberalism. This strategic focus aims to build a state that is not only economically potent, but also socially responsive and resilient.

Modernization Through Structural Reforms

The President emphasized that a central tenet of the new government is the modernization of a system rooted in the 1960s. By implementing bold structural reforms, the initiative targets long-standing inefficiencies, enhances transparency, and rebuilds the bond of trust between the state and its citizens.

Boosting Disposable Income and Competitiveness

The tax reform emerges as a pivotal milestone for the nation’s future. Key elements include setting an untaxed income threshold at €22,000 and introducing additional deductions tailored to household composition—up to an extra €10,000 for families with two children. Moreover, the policy reduces the dividend tax from 17% to 5%, creating an attractive fiscal environment for business investments and supporting enterprises across the country.

Balancing Social Justice With Economic Competitiveness

This reform not only supports families and strengthens the middle class, but it also enhances the daily lives of citizens by realigning the balance between social justice and economic competitiveness. By easing the tax load and increasing available income, the government is poised to drive growth and investment across multiple sectors.

Conclusion: A Promising Future for Citizens

With reliability, institutional gravitas, and targeted reforms, the government is effecting changes that promise to benefit households, families, the middle class, and businesses alike. The new tax framework represents a forward-thinking vision for a modern, equitable economy.

Cyprus Cuts Electricity VAT To 5% As Part Of 100 Fiscal Measures

President Nikos Christodoulidis announced a package of 100 fiscal measures to address inflation and reduce costs for households and businesses. Measures include tax cuts and targeted support. Plan focuses on energy prices, fuel costs and consumer spending. Implementation begins in 2026.

Broad-Based Tax Cuts And Immediate Relief

Among the suite of initiatives is a reduction in fuel tax, widely recognized as an effective short-term relief strategy. However, an even more significant policy step involves transferring savings directly to consumers via improved fiscal mechanisms. This approach ensures that the benefits of tax reductions are channelled efficiently to end users, reinforcing trust and stability in the market.

Strategic VAT Reduction On Electricity

VAT on electricity will be reduced to 5% from May 1, 2026, to March 31, 2027. The rate was previously lowered from 19% to 9%. Electricity pricing remains regulated by the Public Electricity Company. Structure limits the impact of market-driven price increases.

Ensuring Market Stability And Consumer Protection

Alongside tax cuts, the government is monitoring potential increases in consumer costs, including fuel and products that may be considered for zero VAT. President Nikos Christodoulidis said market oversight will be strengthened, with measures aimed at preventing unjustified price increases.

Electricity price is about 26 cents per kilowatt-hour, down 14% compared to the same period in 2025. According to the Public Electricity Company, price increases in the coming months are expected to remain below 5%. Measures are designed to limit inflation pressures and support household costs. Impact will depend on market conditions and implementation.

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