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Parliament Reviews Revisions To Personal Income Tax Reliefs Amid Calls For Comprehensive Reform

Parliamentary Debates Over Tax Reform on the Horizon

The legislature is currently evaluating changes to the tax deductions applicable to individual income tax filers. During a recent session of the Parliamentary Finance Committee, which focused on a broad legislative package for tax reform, multiple stakeholders—including trade unions and affiliated organizations—urged modifications. Lawmakers have called on the executive branch to consider these proposals, warning that parties may advance amendments through legislative motions if their concerns remain unaddressed.

Proposed Adjustments To Allowances And Deductions

Under the draft legislation, the tax-exempt threshold is slated to rise uniformly from €19,500 to €20,500. Additionally, further tax deductions would be introduced for cases where the combined annual income of spouses or cohabitants is capped at €80,000, raised to €100,000 for multi-child households, and fixed at €40,000 for single filers. A deduction of €1,000 is proposed for every child, student, or home energy upgrade, with an elevated benefit of €2,000 for families with multiple children. Furthermore, an interest deduction of €1,500 is offered for qualifying mortgage loans.

Credit Versus Deduction: A Matter Of Administrative Efficiency

A representative from SELK testified before the Finance Committee, endorsing support for individual taxpayers yet cautioning against channeling assistance solely through the tax deduction mechanism. The suggestion was made to replace deductions with tax credits, which would directly reduce the payable tax rather than merely lowering taxable income. This shift could substantially cut down on the administrative burden associated with implementing complex deduction schemes. Meanwhile, a representative of the Bar Association expressed concerns about ambiguities related to capping deductions when individuals receive other state benefits such as allowances or subsidies.

Concerns From Multi-Child Families And Labor Organizations

Representatives of the multi-child families’ association voiced serious reservations about the income thresholds that currently determine eligibility for tax relief. They argued that it is inequitable for larger families—for instance, one with eight children—to be constrained by an income limit of €100,000, while other families are subjected to a limit of €80,000. Furthermore, they called for provisions allowing for the transferability of deductions in single-income multi-child households, mirroring the allowances provided to single-parent families.

Advocacy For Scalable Relief And Fiscal Prudence

Stakeholders have also stressed that tax deductions should be structured on a sliding scale, increasing with the number of children and students. The PASYDY representative favored issuing a tax credit ranging from €200 to €250 per child rather than further deductions, arguing that deductions would impose an unnecessary administrative cost on the state. Additionally, proposals from the PEO recommended an incremental increase in the income threshold by €5,000 for each dependent beyond three children, while suggestions from the SEK call for further enhancements of the tax-exempt threshold to €22,000 and higher benefits for home loan interest and energy upgrades.

Fiscal Impact And Technical Evaluations

Experts from the Centre for Economic Research at the University of Cyprus have evaluated the potential fiscal impact. Without considering the number of dependents or income, the cost could reach approximately €30 million. However, if the income threshold is applied on a sliding scale, the cost estimates drop dramatically to around €3 million. In contrast, unrestricted implementation of all deductions might lead to a fiscal burden of up to €100 million.

Input From The Tax Authority And Banking Sector

Sotiris Markidis, representing the Tax Office, reiterated the position of Finance Minister Makis Keravnos, expressing openness to increasing the income limit for additional benefits from €80,000 to €90,000. Markidis noted that proposals from various unions and political parties would be forwarded to the minister for further review. Acknowledging the inherent complexity of the proposed system for individual taxpayers, he emphasized that any additional measures would only add layers of complexity, though he dismissed concerns over the marginal fiscal impact on families with numerous children.

Disparate Views Among Tax Professionals And Financial Institutions

On another front, SELK has raised objections regarding several technical issues, including the proposed increase in the corporate tax rate from 12.5% to 15%, the extension of loss carryforward periods from 5 to 7 years, and potential abuses related to deductions for interest on loans used for acquiring shares in wholly-owned subsidiaries. These concerns have been echoed by legal professionals. In the coming days, the Tax Department is slated to engage with the Insurance Companies Association to reach a consensus on deductions for premiums. Meanwhile, banks have urged the Finance Ministry to eliminate the credit institution tax, with the Tax Office remarking that it equates to an undue €15 million benefit for financial institutions. Nonetheless, many of the provisions outlined in the reform package are already in practice and will now be formalized through legislation.

Nearly 80% Of Cyprus’ Foreign Investment Came From Outside EU In 2025

Cyprus had the highest share of foreign direct investment (FDI) originating outside the European Union among 14 EU member states reporting data for 2025. According to Eurostat, non-EU economies accounted for 79.4% of the island’s inward FDI, highlighting its distinct position among the reporting countries.

The figures contrast with most other EU economies, where investment from within the bloc remains the main source of foreign capital.

Cyprus Leads In Non-EU Investment Share

Eurostat measures inward FDI positions by the ultimate investing economy, identifying the economy where the investment ultimately originates rather than only the country through which it is channelled. This distinction is important when investments involve subsidiaries or intermediary holding companies.

In nine of the 14 reporting countries, most foreign investment came from within the EU. The Czech Republic recorded the highest intra-EU share, at 75.1%, followed by Romania at 73.3% and Estonia at 64.8%.

Cyprus was among five countries where non-EU economies accounted for more than half of inward FDI. Spain, Sweden, Greece and Denmark also recorded shares above 50%, ranging from 51% to 55.1%.

US Is The Largest Source Of FDI Across Reporting Countries

Across the 14 countries collectively, the United States was the largest ultimate source of foreign direct investment, accounting for 15.4% of the total.

Germany ranked second at 11.5%, followed by France at 9.4%, the United Kingdom at 9.3% and Switzerland at 5.8%.

These figures reflect the combined investment positions of the reporting countries and do not identify Cyprus’s leading individual investment sources. However, the country-level data underline the island’s strong reliance on capital originating outside the European Union.

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