Οn February 26, 2025, the Government of Cyprus announced a comprehensive tax reform aimed at enhancing economic growth, promoting environmental sustainability, and simplifying the tax system. These reforms are designed to increase household disposable income, support business development, and align Cyprus with global tax standards.
Key Highlights of the Tax Reform:
- Increase in Tax-Free Income Threshold:
- The personal income tax exemption threshold will rise from €19,500 to €20,500 per annum. The top tax band of 35% will be applicable for emoluments over €80.000 (up from the current €60.000). Additional tax breaks will be granted to households depending on the number of children and housing loans. This adjustment aims to provide financial relief to individuals and families.
- Corporate Tax Rate Adjustment:
- The corporate tax rate will increase from 12.5% to 15%, aligning with international tax standards and ensuring competitiveness in the global market. The deemed dividend distribution will be abolished and the Special Defence Contribution (applicable to Cyprus resident AND domiciled individuals) will be decreased to 5% from the existing 17%.
- Stamp Duty:
- Stamp duty will be limited to agreements related to immovable property, as well as banking and insurance transactions
- Tax residency – 60-days rule:
- The definition to be extended to cover individuals whose centre of business interests is Cyprus, irrespective of their physical presence
- Introduction of Green Taxation:
- In line with environmental commitments, new green taxes will be implemented. These include levies on fuel, water, and waste management, encouraging sustainable practices among businesses and individuals.
- To offset the impact, the government has outlined compensatory measures, ensuring that the green taxation is revenue-neutral. All proceeds will be returned to businesses and households through support initiatives.
- Simplification of Tax Procedures:
- Efforts are underway to streamline the tax processes, reducing administrative burdens and enhancing compliance for both individuals and businesses.
These reforms are part of the government’s broader strategy to modernize the tax framework, foster economic resilience, and meet environmental objectives. We understand that such changes may raise questions or concerns. Our team is committed to providing you with the necessary guidance and support to navigate these developments effectively. Please do not hesitate to contact us for personalized advice or further information.