An increase in the tax-free income threshold for individuals by €1,000, from €19,500 to €20,500, changes in tax brackets for lower taxation on incomes across all levels, and the transfer of the highest tax rate of 35% to taxable income above €80,000 were proposed by experts today at a special event at the Presidential Palace in Nicosia, where they presented their recommendations for a comprehensive tax transformation.

Presenting the recommendations at the event, which was addressed by Cypriot President Nikos Christodoulides, the Director of the Center for Economic Research (CER) of the University of Cyprus, Elena Andreou, stated that the reform introduces a significant reduction in the tax burden on households, ranging from 63% to 82% for a typical middle-class household.

She also mentioned the following proposed tax deductions for households, based on an income criterion of a total gross household income of up to €80,000 for two working spouses/partners: depending on the family composition, €1,000 per spouse plus two children for each child under 19 and 21 years old, €1,000 per spouse plus two children for each student up to 23 and 24 years old.

Among other examples, she cited the average salary of an employee, which is €28,356 according to the Statistical Service, noting that a household with one working individual without children would pay €422 in taxes, while with two children, the tax would drop to just €22. If that worker is a single parent, they would not be taxed at all.

Regarding corporate tax, it increases from 13% to 15%, while a company recording profits will only be taxed at 5%, down from the current 17%, if it distributes dividends from its earnings. If the company does not distribute dividends and retains profits for reinvestment, it will not be taxed.

The fiscal cost of the tax changes amounts to €150,000,000 – €170,000,000 from individuals and €230,000,000 – €300,000,000 from a reduction in the defense contribution. The impact on state revenue is estimated at €220,000,000 – €270,000,000 from the increase in corporate tax, €80,000,000 – €130,000,000 from other potential taxes, and €50,000,000 – €70,000,000 from VAT/income tax refunds.

Speaking at the presentation, Cypriot Minister of Finance Makis Keravnos stated that today’s event marks the third in a series of presentations concerning the upcoming tax reform, which he described as “a landmark reform for our government.”

“It is one of the key commitments of President Christodoulides’ governance program, which has begun to be implemented methodically, with steady steps and consistency,” he added.