Tax reform in Cyprus after 20 years; Corporate Tax Rate to be increased from 12.5% to 15%

News, dated 22-12-2021

The Government of Cyprus plans to bring a tax reform after 20 years. The proposed tax reforms include raising the corporate tax and introducing carbon tax and fossil fuels taxes to achieve the country’s environmental objectives.

Finance Minister Constantinos Petrides stated that the tax reform will be “fairer, fiscally neutral” and finalized in 2022.

The new reform aims to increase the corporate tax rate from 12.5% to 15%, which is thought to be an opportunity to improve the national taxation framework by reducing the administrative burden with a reduction in taxation burden for businesses securing a neutral reform. In the opinion of the finance minister, an increase in the corporate tax rate will not affect foreign investment to a substantial extent because of the comparative advantages that Cyprus offers as an investment destination. However, business lobby groups argue that the government needs to offer “generous” compensatory measures to protect the economy’s competitive advantage.

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