Historic Approval And Government Endorsement
The Cyprus House of Representatives has approved the comprehensive tax transformation bills, a milestone that the Ministry of Finance hailed as a major step forward. The Ministry expressed its satisfaction with the reform’s passage while acknowledging the sustained contributions of various social and economic stakeholders throughout the extensive two-year consultation process.
A New Framework For Economic Equity And Sustainability
According to finance authorities, the new tax reform is a seminal initiative designed to underpin a more equitable, efficient, and sustainable economic system in Cyprus. Set to take effect on January 1, 2026, the framework aims to bolster social justice by easing the tax burden on both individuals and legal entities. This forward-looking policy strategy seeks to reinvigorate public confidence and stimulate a more productive economic environment.
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Targeted Support And Incentives For Households
The reform includes targeted measures to support families—particularly those with children and students—while also promoting a greener transition for households. Notable incentives include:
- An increase of the tax-free threshold for individuals from €19,500 to €22,000, along with a recalibration of tax brackets.
- Substantial tax deductions for families: €1,000 per parent for the first child, €1,250 for the second, and €1,500 for the third and additional children.
- Deductions for housing and green expenditures, offering a €1,000 allowance per spouse or partner.
- Deductions covering up to €2,000 annually for rented accommodations and interest on subsidized mortgage loans per spouse or partner.
Corporate Tax Adjustments To Enhance Investment Appeal
The new framework also reconfigures fiscal measures for corporate entities, including:
- The complete removal of deemed dividend distribution.
- A reduction in the withholding tax on actual dividend distributions from 17% to 5%.
- The abolition of stamp duty charges.
- Increased exemptions related to Capital Gains Tax objectives.
- Favorable treatment of stock options.
- An adjustment of the corporate tax rate from 12.5% to 15%.
A Vision For A Fair And Resilient Economy
The Ministry emphasizes that the new tax regime is not only an economic adjustment but also a strong social and political statement. It embodies the vision of the government led by Nikos Christodoulides to create an economy that is fairer, more productive, and resilient. With this reform, the country is set to enhance support for the middle class while opening substantial new prospects for young professionals, families, and domestic businesses.
