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A major tax reform is underway in Cyprus as part of the Tax Transformation Project, led by the Centre for Economic Research (CER) at the University of Cyprus. The project aims to create a new tax framework that balances household welfare and business competitiveness.
According to Kathimerini's Dorita Yiannakou, set to take shape over 16 phases, the reform will be finalized by August 2025, following consultations with economic stakeholders, professional bodies, employers' organizations, and trade unions.
Proposed Changes: What’s in Store for Cypriots?
The new tax system will be comprehensive, covering corporate tax, income tax, capital gains tax, stamp duties, and the simplification of the tax process. Key elements include:
1. Focus on Investment and Innovation: The reform will promote business growth and competitiveness by reducing business risks and simplifying compliance. Special attention is given to encouraging investment in research and development (R&D), with tax policies designed to incentivize innovation.
2. Shift in Tax Burden: One of the core proposals is to shift the tax burden away from labor and onto consumption, green taxes, and real estate. This aims to encourage employment, reduce reliance on income taxes, and create a more sustainable, green economy.
3. Focus on Reducing the Informal Economy and Tax Evasion: The reform project also emphasizes measures to address the informal economy and combat tax evasion, ensuring a fairer system for businesses and individuals.
4. Impact on Households: Cypriot families could benefit from the simplified tax system, potentially paying lower taxes on income and receiving incentives for green investments and property ownership.
Consultations and Research
The project team has already engaged with 60 professional bodies and associations in Cyprus for feedback. They are studying the best practices from other European countries, using econometric models and macroeconomic analysis to ensure the reform’s success. An impact report has been prepared to assess the expected effects of these changes.
Alignment with EU and Green Commitments
The tax transformation aligns with Cyprus’ Recovery and Resilience Plan, as well as its Vision 2035. The reform takes into account EU tax trends and international best practices to ensure that Cyprus remains competitive and sustainable in a rapidly changing global market.
The proposed tax changes aim to create a more efficient, fair, and competitive system. While the shift in tax burden and simplification of the system could benefit Cypriot households, especially with lower labor taxes, the success of the reform depends on a careful balancing act between business needs, household welfare, and environmental goals. As consultations progress, the final framework is expected to cater to a broad range of interests while aligning with broader economic and green objectives.
