Tax Reform in Cyprus

Tax Reform in Cyprus

The Cypriot government is actively working on a comprehensive tax reform aimed at fostering economic growth, social equity, and attracting new investments. This reform not only reflects global tax trends but also opens new opportunities for businesses and individuals.

Corporate Tax

• Rate Increase: The corporate tax rate will rise from 12.5% to 15%, aligning with international standards and maintaining Cyprus’ competitiveness in the global market.

• Abolition of Deemed Dividend Distribution Rules: This change simplifies tax regulations for companies, focusing on actual dividend payments.

Personal Income Tax

• Increased Tax-Free Threshold: The tax-free income threshold will increase from €19,500 to €20,500, easing the financial burden on low-income individuals.

• New Tax Brackets: The introduction of new tax rates aims to accurately reflect income levels and ensure fair taxation:

  • 20% for incomes between €20,501 and €30,000,

  • 25% for incomes between €30,001 and €40,000,

  • 30% for incomes between €40,001 and €80,000,

  • 35% for incomes exceeding €80,000.

Special Defence Contribution (SDC)

• Abolition of SDC on Rental Income: This change will increase rental income for property owners.

• Reduction in SDC on Dividends: The SDC rate on dividends will decrease from 17% to 5% for tax-resident individuals, making Cyprus more attractive to investors.

Non-Resident Status: New Opportunities

• Extension of Non-Resident Status: The option to extend non-resident status with an annual fee will be introduced, benefiting those temporarily residing in Cyprus.

Impact and Future Prospects

The tax reform in Cyprus is not just about changing tax rates; it’s a strategic move towards creating a more balanced and competitive economy. The increase in corporate tax aligns with global standards, while the reduction in dividend taxes for residents may attract more investments. Businesses must closely monitor these changes and adjust their financial plans accordingly.

This reform opens new horizons for Cyprus’ economy, making it more appealing to international companies and investors, particularly in the context of digital transformation and green transition. However, final details will be clarified in the coming months, and businesses should stay informed to effectively plan and adapt.

This publication is intended as a general guide and for informational purposes only. It is not a substitute for professional advice. Readers should not rely on it without obtaining independent advice based on their specific circumstances. The authors or publishers do not accept liability for any losses caused by actions or omissions based on this publication. For further advice, please contact us through the details provided on our website.