Nicosia: The Ministry of Finance expressed its satisfaction with the passing of the bills concerning a comprehensive tax reform in a statement issued on Monday afternoon, while thanking all social stakeholders for their contribution to the success of this project and their active participation with suggestions throughout the two years that the project lasted.
According to Cyprus News Agency, the tax reform is a flagship initiative that is a key pillar in achieving a fair, efficient, and sustainable economic system in Cyprus. The implementation of the new tax framework, set to begin on January 1, 2026, aims to strengthen the sense of social justice by easing the tax burden through the adoption of weighted reliefs for both citizens and businesses.
The Ministry indicates that the new framework is expected to effectively support families, particularly those with children and students, and aid in the green transition of households. The reform also aims to bolster the state's housing policy through discounts for housing and green expenses. Additionally, it seeks to maintain and enhance Cyprus' appealing investment climate by offering a competitive tax system that fosters entrepreneurship.
Key aspects of the tax reform affecting individuals include an increase in the tax-free threshold from pound 19,500 to pound 22,000, and adjustments to tax brackets with significant exemptions for families with children. Each parent or cohabitant will receive exemptions: pound 1,000 for the first child, pound 1,250 for the second, and pound 1,500 for the third and subsequent children.
Furthermore, there is a tax exemption for housing and green expenses for natural persons up to pound 1,000 for each spouse or cohabitant, and an exemption for rents and interest on serviced housing loans up to pound 2,000 per year for each spouse or cohabitant.
For legal entities, the reform includes the abolition of deemed dividend distribution, a reduction in withholding tax on actual dividend distributions from 17% to 5%, the abolition of stamp duty, increased exemptions for Capital Gains Tax purposes, favorable treatment of stock options, and an increase in corporate tax from 12.5% to 15%.
"The new tax framework is a social and political choice that implements the vision of the Nikos Christodoulides government for a fairer, more productive, and more resilient Cyprus. A tax system that supports the middle class and provides real opportunities for young people, families, and Cypriot businesses," the statement concludes.