Nicosia: With the upcoming implementation of tax reforms in January 2026, Deputy Minister to the President, Eirini Piki, announced significant tax relief measures that are expected to positively impact household disposable incomes. She highlighted that approximately 200,000 taxpayers have already experienced reduced tax obligations, and by 2026, around 30,000 individuals are anticipated to be completely exempt from paying taxes.
According to Cyprus News Agency, Piki addressed these developments at the "Tax Reform 2026" conference, organized by the Cyprus Association of Certified Public Accountants (CPA Cyprus). The event aimed to disseminate information regarding the forthcoming tax reform.
In her discussions with journalists during the conference, Piki emphasized that the adjustments led to a noticeable increase in net earnings for nearly 200,000 taxpayers in January. By 2026, the tax relief measures will extend to an additional 30,000 individuals, who will be exempt from paying taxes.
The reform introduces a new tax-free threshold of £22,000, simplifies tax brackets, abolishes the deemed dividend distribution, and reduces the Special Contribution for Defence to 5%. These measures are intended to provide financial relief to families and businesses, thereby enhancing liquidity and competitiveness.
Tax Commissioner Sotiris Markidis also addressed the conference, underscoring the major changes impacting businesses. He noted that the corporate income tax rate has increased from 12.5% to 15%. Concurrently, the deemed dividend distribution has been abolished, and the special defence contribution on dividend distributions has been reduced from 17% to 5%.
Markides asserted that these alterations significantly enhance the competitiveness of Cypriot entrepreneurs, aligning with the primary objectives of the reform. He also mentioned initiatives aimed at strengthening tax compliance, such as the temporary sealing of business premises for non-compliance and the ability to freeze shares of taxpayers with tax liabilities exceeding £100,000.
The Deputy Minister described the reform as a transformative change, highlighting the government's aim to establish a simple, transparent, and effective tax system that fairly distributes burdens and provides clear benefits to the economy and citizens. She also noted that this initiative is part of a broader effort to modernize the state and boost competitiveness. Economic indicators, such as a growth rate nearing 4% for 2025, public debt falling below 60% of GDP, and stable fiscal surpluses exceeding 3%, were also pointed out.
Odysseas Christodoulou, president of the Cyprus Institute of Certified Public Accountants, remarked on the significant interest generated by the reform, evidenced by a turnout of over 300 delegates at the conference. He expressed satisfaction with the rapid training of over 2,000 CPA members and business community representatives through recent seminars.
Christiana Erotokritou, president of the Standing Committee on Financial and Budgetary Affairs, credited the successful passage of the reform to the Finance Committee's diligent efforts and the collaborative spirit of all parties involved in the discussions.
The Tax Commissioner reported a remarkable increase in tax revenue by over 60% in 2025 compared to 2021, with revenues exceeding £8 billion. This trend is attributed to the government's economic policies and strategic interventions to bolster tax compliance.
Additionally, efforts to clear backlogs in income tax returns have led to the processing of approximately 3.3 million returns, resulting in £600 million in income tax being issued and £400 million refunded to taxpayers. The Taxforall (TFA) system, a £30 million digital transition project, has facilitated the processing of about 250,000 VAT refund requests, totaling £1.6 billion in refunds.