After six weeks of near-daily meetings held under tight deadlines, the House of Representatives’ Finance Committee on Thursday concluded its examination of the government’s tax reform bills, which are set to be put to a vote in plenary on Monday.
Following joint amendments submitted by DISY, DIKO, DIPA and EDEK, and subsequently incorporated into the government bills, the tax-free income threshold is raised to €22,000. The annual family income ceiling for tax deductions is also increased substantially, alongside a gradual scaling-up of tax allowances aimed at supporting the middle class.
At the same time, deductions for interest on performing housing loans and for rent rise to €2,000 from €1,500, while provisions are included for the abolition of stamp duty.
Amendments and proposals before the House
Political parties are expected to table further amendments to the government bills during the plenary debate. Also heading to a vote are two AKEL-sponsored legislative proposals, from a total of 11 discussed, relating to the taxation of immovable property and the introduction of a corporate levy. In addition, a proposal by the Greens Movement will be put forward, providing for an exemption from capital gains tax on the sale of a primary residence linked to loans that became non-performing up to 2022.
Remaining outside the scope of Monday’s plenary, among other proposals, is AKEL’s motion for the taxation of banks’ excess profits.
AKEL proposals
Presenting the AKEL proposals to the Finance Committee, party MP Aristos Damianou outlined two measures. The first provides for an annual immovable property tax of one per mille on property valued above €3 million. The second αφορά a graduated levy on registered companies based on asset value.
Under the proposal, companies with assets between €1 million and €2 million would pay €350 annually, rising to €750 for assets between €2 million and €5 million, with the levy increasing on a sliding scale up to €1,250.
Proposals were also submitted by Greens MP Stavros Papadouris and ELAM MP Sotiris Ioannou, providing for exemptions from capital gains tax on sales arising from the restructuring of non-performing loans.
Reduced VAT proposals postponed
In total, four legislative proposals relating to the application of reduced VAT rates on specific products were tabled during committee deliberations. Following discussion, it was decided that these would be withdrawn from Monday’s plenary agenda and reintroduced in January, after the Ministry of Finance completes an assessment of their fiscal impact.
Significance of the vote
Speaking to Politis, Finance Committee chair Christiana Erotokritou said that, despite the compressed timetable and the parallel examination of the state budget, the committee had managed to complete its work.
She noted that the adoption of the tax reform, alongside the budget, would help the Cypriot economy enter 2026 on a positive footing.
Asked to comment on concerns that individuals earning below the €22,000 threshold are effectively excluded from the reform, Erotokritou said that, internationally, tax reform is designed to collect revenue from those who generate taxable income.
“For this segment of the population, it is the state’s responsibility to put in place social support measures,” she said.
On expected revenues from the reform, she stressed that the state has the capacity not only to impose but also to collect taxes, citing as an example the requirement for rents above €500 to be paid electronically by bank transfer.