Newsroom
Finance Minister Makis Keravnos said Friday he is open to raising the family income ceiling for tax deductions to €90,000 from the proposed €80,000, noting that “the cost is not prohibitive.”
Keravnos presented the government’s long-awaited tax reform to the parliamentary finance committee, calling it a step toward fairness, competitiveness, and fiscal sustainability. He urged cooperation “without petty politics” to modernize a system unchanged for more than two decades.
The reform increases the personal tax-free threshold from €19,500 to €20,500 and introduces family-related deductions of €1,000 per child and €1,000 per student, doubled for single-parent households, for families earning under €80,000 a year (€100,000 for those with more than three children). Additional deductions cover housing loans, rent, energy upgrades, and electric vehicle purchases.
For businesses, the plan raises the corporate income tax rate from 12.5% to 15%, abolishes the deemed dividend distribution on profits after Jan. 1, 2026, and cuts the defense contribution rate on profits from 17% to 5%. Rental income will no longer face the special defense levy, and losses can be carried forward for seven years instead of five.
Anti-evasion measures include stricter penalties, mandatory electronic payments for rents over €500, and compulsory tax returns for all citizens over 25, regardless of income.
Keravnos said the reform is fiscally neutral, with a small projected surplus of €18 million after revisions following consultations with stakeholders and the University of Cyprus Economic Research Centre.
Trade unions criticized the plan as favoring corporations over wage earners, while business groups welcomed the simplification and competitiveness measures. Political parties expressed mixed reactions but broadly agreed the reform is overdue.
Keravnos said he hopes Parliament will pass the legislation early next year so the new framework can take effect in January 2026, helping Cyprus meet an EU Recovery and Resilience milestone by August.
