Iacovos Themistocleous on why his initial reaction to the proposed tax reform recommendations is neutral

While acknowledging that some of the expert recommendations included in this week's presentation of the proposed tax reform are a step in the right direction, Iacovos Themistocleous, Tax Director & Board Member, RSM Cyprus, has also expressed some concerns.

Asked to share his initial reaction with CBN following the presentation by experts from the University of Cyprus' Economics Research Centre (CypERC), Themistocleous underlined, "Following the announcements regarding the suggested tax reform of the state, we heard the headlines of various topics that have been the subject matter of the expert team. We are of the opinion that a number of them still need to be studied further. Therefore, our first reactions are neutral."

He went on to share a more positive view on the recommendations concerning the taxation of individuals.

More specifically, Themistocleous said, "Regarding personal taxation, we noticed that the intention is to bring back, provisions that were part of the legislation many years ago. The aim is to provide specific tax deductions, in an effort to treat the middle class more fairly. We noted down the suggestions relating to deductions provided to families, including single parent entities, based on the number of children each family has and other deductions that motivate young families to acquire their first home. Taking under consideration that these provisions apply to the vast majority of the population in Cyprus, it is our firm belief that these suggestions are heading in the right direction."

With reference to the tax treatment of the companies, the expert noted, that "the suggestions relate to changes in specific tax rates on the corporate income tax and Special Contribution on Defence on actual dividend distribution, while at the same time, we note the abolition of the deemed distribution of dividends rule. It is clear, though, that there is no substantial shift in the tax system's philosophy or structure."

He went on to share, "As a point of interest, we have not observed any references or intentions to provide tax motives to other economy sectors, such as the primary sector, including industries like agriculture, fishing and other relevant industries. Therefore, from a first insight, we are concerned about how the suggestions will assist the general economy of Cyprus. We highlight the reference to the taxation of crypto assets, a topic highly ranked in public discussions but not captured in the current tax legislation."

In addition, Themistocleous continued, "it has been noted that no references were made to Green taxation that is expected to be applied during the year, but only references to Green transition, the provisions of which are still under consideration by the expert team."

"As a final note, considering that the discussions regarding the long-awaited tax reform have been around for a long time, we had higher expectations. We will be on hold on anything still being considered, as well as the results of the consultations to follow, to be in a position to have a better picture of the whole tax reform package," the expert concluded.