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.
As noted, tax reform is a flagship initiative that is a key pillar in achieving a fair, efficient, and sustainable economic system in Cyprus, adding that the implementation of the new tax framework, undoubtedly from January 1, 2026, will strengthen the sense of social justice by easing the tax burden through the adoption of weighted reliefs for both citizens and businesses.
According to the Ministry, the new framework is expected to effectively support families, especially those with children and students, the effort for a green transition of households, but also the state’s housing policy, through the granting of discounts for housing and green expenses, while the tax reform maintains and strengthens Cyprus’ attractive investment environment through a competitive tax system that effectively enhances entrepreneurship.
As noted, the key aspects of the tax reform affecting individuals include an increase in the tax-free threshold for individuals from pound 19,500 to pound 22,000 and the readjustment of tax brackets and significant tax exemptions for families with children for each parent or cohabitant (1st child – pound 1,000 for each parent, 2nd child – pound 1,250 for each parent, 3rd + child – pound 1,500 to each parent).
There is also a tax exemption for housing and green expenses for natural persons amounting to pound 1,000 for each spouse or cohabitant and a tax exemption for rents and interest on serviced housing loans up to pound 2, 000 per year for each spouse or cohabitant.
Similarly, the key aspects of the tax reform concerning legal entities are the complete abolition of deemed dividend distribution, the reduction of withholding tax on actual dividend distributions from 17% to 5%, the abolition of stamp duty, the increase in exemptions for Capital Gains Tax purposes, the favourable treatment of Stock Options, and the 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.