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Cyprus Tax Reform Ushers In Revised Deductions And Elevated Penalties

by THEFUTURE.TEAM

February 12, 2026

Effective January 1, Cyprus has implemented significant changes to its tax legislation. The reform adjusts rates and deductions and imposes substantially higher penalties, signaling a robust commitment to boosting compliance and deterring evasion.

Enhanced Deterrence Measures

The revised framework significantly raises administrative fines across a wide range of activities. One of the most notable changes concerns the obligation to accept credit card payments. The penalty for non-compliance has increased to €6,000, up from €4,000 previously and €2,000 when the requirement was first introduced in 2021. The rule applies across retail, services, hospitality, and leisure sectors and forms part of broader efforts to limit undeclared transactions and protect public revenue.

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Adjustments To Reporting And Submission Deadlines

Penalties for failures related to tax filings and data submissions have also been tightened. The daily fine for a continuing violation has risen from €17 to €20, while the penalty for unjustifiably omitting income from a tax return now reaches €5,000, compared with €2,000 under the previous regime. Non-compliance with invoicing and receipt requirements is subject to the same ceiling, replacing the earlier fine of €450. These measures reinforce stricter expectations around accurate reporting and documentation.

Graduated Consequences For Late Payments And Serious Breaches

A tiered penalty system now applies to late submissions. Individuals face a fine of €150, small companies with a turnover below €1 million are charged €250, and larger businesses incur a fine of €500. If deadlines set by the tax commissioner are missed, the penalties escalate further to €300, €500, or €1,000, respectively. No fine is imposed, however, when an official extension is granted, and returns along with self-assessed taxes are filed within the approved timeframe, typically by July 31 or January 31.

Strict Penalties For Serious Tax Offenses

The reform also strengthens sanctions for more serious violations. Where business premises are sealed due to breaches such as failure to issue lawful receipts or outstanding tax debts, any attempt to tamper with the seal constitutes a criminal offense. Such actions may result in fines of up to €30,000 and imprisonment of up to two years. In cases of unpaid taxes, company executives, board members, or financial officers may also be held personally liable.

Penalties linked to the extraordinary defence contribution have been significantly increased. A first conviction may lead to a fine of up to €5,000, together with payment of up to double the amount owed. A second conviction carries far heavier consequences, including fines of up to €100,000, imprisonment of up to two years, and payment of up to four times the original contribution. Offences related to defence procurement or associated financial benefits are punishable by fines of up to €30,000, rising to €100,000 when a public official or person acting on behalf of the Republic is involved.

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Cyprus Business Chamber Warns Bank Tax Threatens Investor Confidence

by THEFUTURE.TEAM

February 12, 2026

Chamber Issues Stern Warning Against Bank Tax

The Cyprus Chamber of Commerce and Industry (Keve) has issued a forceful statement opposing the proposed imposition of additional taxation on banks. The chamber argues that further levies would be economically unsound and send a negative signal to international investors.

Heavy Tax Burdens And Their Impact

Keve highlighted that banks have already contributed significant tax revenues between 2017 and 2024, reporting €285 million in corporate tax and €470 million in special levies on deposits. This cumulative contribution of €755 million has supplied the state with ample resources to support borrowers and vulnerable groups, rendering any extra tax unnecessary.

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Risks To Financial Stability And Investor Confidence

The chamber stressed that using taxation as a tool of social policy is inappropriate. Targeting banks, which are a key pillar of the economic framework, could undermine the predictability and stability of Cyprus’s tax and institutional environment. In a climate where investor confidence is paramount, such a strategy risks weakening the country’s credibility on the international stage.

Broader Implications For Monetary And Lending Policies

Concerns extend beyond immediate fiscal impacts. The European Central Bank (ECB) has warned that increased taxation based on customer deposits may disrupt the transmission of monetary policy, impacting credit institutions’ ability to maintain appropriate capital buffers and set competitive lending rates. Using Belgian banks as an example, the ECB noted that even well-capitalized institutions might face procyclical pressures, potentially restricting lending to households and firms.

Setting A Precedent With Lasting Consequences

In addition to domestic concerns, Keve cautions that targeting a specific sector could set a dangerous precedent. Diverging from the policy recommendations of the International Monetary Fund and the European Stability Mechanism, such a move distinguishes Cyprus from high-credit rating EU member states like Germany and the Netherlands, which do not impose extraordinary sector-specific charges.

Looking Ahead: Balancing Social Objectives With Economic Stability

While Keve supports well-targeted social support measures, it insists that these initiatives must not compromise financial stability, investor confidence, or Cyprus’s international competitiveness. The chamber further called on all businesses to contribute to society through robust corporate social responsibility programs.