The approval of the tax reform bill package by Parliament has brought satisfaction, and also relief, to the business community, something that paves the way for the implementation of the new framework from 1 January 2026.
In fact, the country's two employers' organisations, the Cyprus Chamber of Commerce & Industry (CCCI) and Cyprus Employers & Industrialists Federation (OEB), appear pleased with the inclusion in the bills of several positions and opinions that they submitted on the issue from the very beginning.
It is worth noting that the new tax framework includes important aspects concerning legal entities (domestic and foreign businesses), specifically:
- Complete abolition of deemed dividend distribution.
- Reduction of withholding tax on actual dividend distribution from 17% to 5%.
- Abolition of stamp duty.
- Increase in exemptions for Capital Gains Tax purposes.
- Favorable treatment of Stock Options.
- Increase in corporate tax from 12.5% to 15%.
As far as individuals are concerned, with the tax reform:
- The tax-free amount is increased from €19,500 to €22,000 and the tax scales of the tax brackets are adjusted.
- Significant tax exemptions are granted for families with children for each parent or partner, specifically for the first child €1,000 to each parent, for the second child €1,250 to each parent, and for the third and each additional child €1,500 to each parent.
- A tax exemption for housing and green expenses is granted to natural persons amounting to €1,000 for each spouse or common-law partner.
- A tax exemption is provided for rent and interest on a serviced housing loan up to the amount of €2,000 per year for each spouse or common-law partner.
Philokypros Roussounides: "Historic opportunity to upgrade Cyprus' competitiveness"
In statements to InBusinessNews, on the occasion of the passing of the tax reform, the Secretary General of the CCCI, Philokypros Roussounides, welcomed the vote in favour of the bills, speaking of a landmark reform that modernises the tax system and aligns it with the real needs of the modern economy.
According to Roussounides, "the tax reform constitutes a historic opportunity to upgrade Cyprus's competitiveness, enhancing its stability, transparency and international attractiveness as a business and investment destination."
At the same time, he expressed the Chamber's satisfaction about the integration of basic, timeless suggestions from the business world, which - he underlined - shape a more functional and developmental tax framework, such as the abolition of deemed dividend distribution, the reduction of the Extraordinary Defense Contribution on dividends to 5%, legal security, balance and investment confidence.
As he said, throughout the institutional dialogue, the CCCI prioritised legal security and stability of the business environment, underlining that through targeted interventions, it achieved:
- balancing collection measures with clear limits and judicial control, protecting healthy businesses,
- avoiding regulations that would cause uncertainty in the functioning of boards of directors and the headquartering philosophy,
- maintaining incentives that enhance extroversion and attract investment.
The reform, added the Secretary General of the CCCI, also has a substantial social impact, since - he explained - the increase in the tax-free threshold and the targeted family support measures strengthen the disposable income of households and contribute to addressing the low birth rate.
"Strengthening social cohesion is a prerequisite for sustainable growth and a strong internal market," he pointed out.
"We believe that the vote in favour of the tax reform marks a new starting point for the Cypriot economy and the CCCI operated with consistency, responsibility and documented proposals that were listened to and incorporated into the new framework," he pointed out, further emphasizing that "we remain committed to transparency and compliance, with the aim of accelerating investments, supporting innovation and strengthening small and medium-sized enterprises - the backbone of our economy."
"The CCCI will continue to closely monitor the implementation of the reform, remaining a reliable and institutional partner of the State for the economic progress and prosperity of society," concluded Mr. Rousounidis.
Michalis Antoniou: "What business demanded was largely incorporated into the new framework"
On his part, the Director General of OEB, Michalis Antoniou, emphasised to InBusinessNews that with the passage of the tax reform, a very important period is coming to an end.
"We believe that the State did what it should and the Executive and Legislative Branches rose to the occasion, they worked at a fast pace, they suffered, but they achieved what the business community was asking for, namely the passage and implementation of the new tax reform as of 1 January 2026, and we congratulate them and thank them for this," he added.
"For our part," he continued, "we are generally satisfied, as what business requested has largely been incorporated into the new tax environment. It is now up to us to utilise this tool, for the benefit of the entire country and society in general." "We must say that in order to get here, both the OEB and all the organisations representing business in Cyprus played an important role, with seriousness and a sense of responsibility towards society as a whole," he underlined.
According to Antoniou, "the most important thing that people need to understand is that we unreservedly supported the strengthening of tax authorities to combat tax evasion and supported providing tools and capabilities to ensure tax compliance."
This, he indicated, was supported from the beginning by both the OEB and the entire business world, because - he explained - and given that judicial procedures are very time-consuming, the main arm of the state that deals with tax compliance could not remain powerless. "For this reason, we strengthened it and supported this effort," Michalis Antoniou underlined.
"In general, I repeat, the positions of business were heard to a fairly large extent and to a satisfactory degree and it is now up to businesses, in the country's productive fabric, to take advantage of the new tax environment. Of course, we will monitor the development of things and mainly what impact this major and very important reform will have on development - we believe that it will have a positive impact - and if necessary, we are here, partners of the state, to re-discuss any corrective or adaptive measure, which may - I repeat - be needed", concluded OEB's Director General.
(Source: InBusinessNews)
