Significant Tax Reforms are on the Way in Cyprus

In an interesting interview on the 29 August 2021 with Politis Newspaper, the Minister of Finance Constantinos Petrides announced that Cyprus will soon implement extensive tax reforms.

From the interview it can be understood that the upcoming reforms will be structured in a way which shall not affect the competitiveness of Cyprus.

The Finance Minister stated that “The last tax reform took place in 2002 with a view of joining the EU. Since then, much has changed in the structure of the economy and we need to modernize it. The new reforms will certainly take into account the climate change and carbon emission providing incentives and disincentives regarding fuel use and pollutants. We will also look at the corporate tax part. I must say that Cyprus is often unjustly targeted as a tax haven, which is not the case in reality. Having a favorable tax regime does not make you a tax haven.”

The Minister pointed out that “while we theoretically have a low corporate tax rate of 12.5% ​​- an international minimum of 15% is being discussed – the actual tax rate is much higher. In many other countries the exact opposite is true, the corporate tax is higher and then some discounts follow. In Cyprus there are no discounts, but charges. We will certainly look at the issues of additional contributions and other taxes in relation to the corporate tax without harming the competitiveness of the Cypriot economy, but by modernizing the whole framework and correcting some misconceptions that have plagued Cyprus abroad for years.

Although no further information was given on the reforms and based on the interview, we can only assume that certain additional charges which are applicable on Cypriot Companies and which are not in the form of corporate income tax might be abolished and converted into corporate income tax.

These are only assumptions and we shall be waiting with much interest and of course curiosity the upcoming reforms. What we take from this interview is that the competitiveness of Cyprus will not be affected.

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