Five of the country’s largest Provident Funds - representing tens of thousands of members - are calling for the preservation of the current tax regime governing provident funds, arguing that the government’s proposed tax reform threatens the long-term value of workers’ pension rights.
In a letter to the House Finance Committee, the Provident Funds express strong opposition to the planned amendments to the Income Tax Law, which, they argue, would introduce changes directly affecting all approved Funds. The signatories include the Pancyprian Provident Fund of PEO Members, the Provident Fund of SEK Members, the DEOK Members’ Fund, the Provident Fund for Workers in the Construction Industry and Related Trades, and the Provident Fund for Employees of the Hotel Industry.
Taxing funds
Under the existing framework - specifically Article 8(16) - income earned by Provident Funds, Pension Funds and Insurance Funds approved under Article 14(3) is exempt from taxation. This exemption, they stress, was created to ensure that fund income remains intact, thereby strengthening the ability of the Funds to increase members’ future pension benefits, since all profits are ultimately returned to the members themselves.
“Despite public declarations by the government about strengthening the Second Pension Pillar and easing the tax burden on households - as well as the relevant recommendations of the Council of Economy and Competitiveness regarding the pension system (dated 16/05/2025) - the amendment bill in question proposes, among other things, that from 1 January 2026 the tax treatment of approved Funds be altered in cases where income derives from business activity or property exploitation,” the Funds write.
In addition, from 1 January 2031, the draft law proposes taxing any profit arising from the redemption of units or shares.
Benefits at risk
According to the Funds, such changes would “significantly reduce the net income of Provident Funds due to taxation and, by extension, diminish the future benefits of members.”
They call on the competent authorities to withdraw the proposal and safeguard the existing tax regime to protect the value of workers’ pension rights. The Funds emphasise that the current tax treatment has made Provident Funds attractive to both employers and employees. Any shift in the tax base, they warn, “would weaken the institution itself and distort competition in favour of private insurance companies.”
Maintaining the current framework, they argue, is essential for strengthening savings through the Second Pension Pillar and ensuring that Provident Funds remain reliable and effective mechanisms for protecting workers’ pensions and long-term savings.
Failing to do so, they conclude, would amount to a direct weakening, and an implicit undermining of the role of Provident Funds as a cornerstone of pension security.