The government and the parties that supported the reform emphasise that the changes will strengthen disposable income and improve economic competitiveness. From January, employees earning above 19,500 euro a year will see higher net salaries as the new income tax brackets take effect.
Expanded deductions for families
Households will benefit from additional tax relief depending on their composition. The reform introduces a deduction of 1,000 euro per parent for the first child, 1,250 euro per parent for the second child and 1,500 euro per parent from the third child onwards.
There are also deductions of up to 1,000 euro per spouse or partner for housing and green expenses, and up to 2,000 euro annually per spouse or partner for rent or interest on a serviced home loan.
Reduced taxation for investors
Shareholders will see the dividend tax rate fall to 5 percent, down from the previous 17 percent defence contribution rate. The government argues that this adjustment supports investment and improves Cyprus’ overall tax competitiveness.
President Nikos Christodoulides called the legislation a reform that restores balance between social justice and economic competitiveness. In a televised statement he said the benefits flow directly to households, the middle class, families and businesses.
The Ministry of Finance stated that the reform strengthens the middle class and opens opportunities for young people, families and Cypriot companies.
Political positions
DISY spokesperson Onoufrios Koullas said party amendments, introduced with other parliamentary forces, corrected weaknesses in the government’s original bills. He estimated that around 250,000 employees will pay less income tax starting in January.
DIKO deputy leader and finance committee chair Christiana Erotokritou described the reform as the most comprehensive tax legislation ever approved, ensuring that benefits reach more citizens.
DIPA reiterated that its approach remained centred on social priorities, fairness, household relief and reducing inequalities.
Two AKEL proposals were also put to a vote. One involved taxing property worth more than 3 million euro and the other introduced a graduated levy on companies. Both were rejected by the House.