The Cyprus Employers and Industrialists Federation (OEB) in a first reading of the outline of the Tax Reform presented today at the Presidential Palace by the Centre for Economic Research (KOE) of the University of Cyprus, finds that a very serious in-depth, comprehensive and holistic study and processing of the tax data and the challenges of Cyprus has been carried out both internally and in relation to Europe and the rest of the world.
As far as individual dividends are concerned, OEB notes that the estimated distribution of dividends is finally abolished, which it welcomes with great satisfaction.
The increase of the corporate tax rate from 12.5% to 15% has a two-pronged effect: On the one hand, it increases the existing tax burden by 20% and on the other hand, it removes international negative criticism. The OEB recommended the maintenance of 12.5%, but all the proposals seem to maintain the competitive advantages and attractiveness of the Cypriot tax framework.
The above two changes are aligned with the general requirement for convergence of the tax treatment of foreign and Cypriot investors/shareholders and together restore conditions of equal competition in terms of tax burdens.
As a rule, the reduction of tax burdens leads to an increase in tax revenues through the increased economic activity caused by this. This is expected to happen in this case as well, but OEB points out that:
- The timetables as presented must be adhered to so that the new framework can be implemented as planned, on 1.1.2026.
- The course of fiscal consolidation of the country cannot be slowed down. The objectives of the medium-term programme for the production of fiscal surpluses, the reduction of public debt and the reduction of the current account deficit must continue to be implemented.
This requires a systematic monitoring of the public revenue segment after the reform, as well as a significant contraction in the growth rate of non-productive expenditure, especially fixed and inflexible expenditure, the most basic of which are the state payroll and social benefits.
The OEB will study in depth and with the help of its experts the whole framework as it has been presented and will submit documented suggestions to the JIT and the government where necessary.
Cyprus has an impressively flexible and creative business, excellent quality human capital, an attractive investment environment and good infrastructure. It is up to the State to order these enormous advantages into a comprehensive, integrated and solid ecosystem.
