"The direction of tax reform is correct," TechIsland Chairman Valentinos Polykarpou has said in a discussion on Cyprus's position in the markets, the messages foreign investors are receiving, and the new tax framework.
Polykarpou was speaking during the 9th Cyprus International Tax Conference – Cyprus Tax Reform 2026: Implementation, Impact & Positioning in a Changing Global Tax Landscape event.
Starting off by noting that TechIsland represents a broad and multidimensional technology ecosystem, Polykarpou mentioned that 52% of the organisation’s member companies are Cypriot, while 48% come from foreign direct investment, covering the entire spectrum of the market, from start-ups and small and medium-sized companies to large multinational groups.
As he explained, this report is crucial to understanding that TechIsland’s feedback on tax reform reflects the needs of the entire technology sector and not a single category of businesses. He stressed that technology is one of the fastest growing and most structurally important sectors of the Cypriot economy, contributing €8 billion, corresponding to 16% of the country’s gross value added, making it a key pillar of growth, employment and innovation.
According to Polykarpou, the overall picture conveyed by the technology sector is that the new tax framework is moving in the right strategic direction, reflecting Cyprus's effort to align with international standards, while maintaining its competitiveness as a business and investment destination. As he mentioned, several of the existing incentives that supported the development of the technology sector have been maintained and in some cases expanded, sending a strong message of continuity and stability.
He made particular reference to the IP Box regime with a 2.5% tax rate, as well as the extension of the R&D super-deduction by 120% until 2030, noting that these measures support innovative businesses and allow them to invest over time, without the fear of a sudden abolition of key tax incentives. At the same time, he pointed out that the non-dom regime remains in force, with the possibility of extension beyond 17 years, enhancing Cyprus's attractiveness for international founders and senior executives.
He also described the reduction of the Extraordinary Defence Contribution on dividends from 17% to 5% as a positive development , emphasising that this change substantially improves the overall tax result for founders and shareholders. As he stated, taking the overall context into account, the provisions of the reform appear to support the continuation of Cyprus's path as a technology hub, strengthening innovation, entrepreneurship and long-term investments.
In the second part of his statement, Polykarpou focused on the issue of implementation, underlining that the crucial issue is no longer the direction of the reform, but its practical implementation. As he stated, it is important that the new measures are monitored in practice and, where necessary, targeted improvements are made based on the experience of companies.
As a typical example, he mentioned the introduction of the 8% stock option taxation regime , which he characterized as a particularly positive development and a result of TechIsland's established position. He explained that remuneration through equity incentives is a critical tool for technology companies, especially startups and scaleups, which are often unable to offer competitive salaries or benefit packages, but need a high level of expertise to grow.
He noted that through the stock options framework, companies can combine lower salaries with equity participation, making the overall package more attractive to employees. He stressed, however, that it is equally important that the limitations and conditions of the framework are realistic and enforceable, as there are currently specific restrictions that may limit its usefulness for technology companies.
In closing, he stated that any new mechanism requires time and adjustments to function effectively and that tax reform should be treated as a living framework, which evolves through its implementation in practice. He stressed that it is encouraging that the government has demonstrated an open and constructive attitude towards feedback from stakeholders, adding that TechIsland will continue to submit proposals for practical improvements, with the aim of the reform further strengthening Cyprus' position as a place where technology companies can create, grow and scale sustainably.
(Source: InBusinessNews)
