The public consultation on Cyprus’s ambitious tax reform package officially closed today, yet sharp disagreements remain among professional associations, businesses, and social groups. The reform, which consists of six separate bills, aims to modernize the tax system, boost efficiency, and align it with international standards. However, reactions over the past two months have exposed deep divisions over its potential impact on competitiveness, fairness, and economic growth.

The Ministry of Finance launched the consultation on 18 July and later extended it by two weeks due to strong reactions and the summer holiday period. By the final day, more than 60 comments had been filed on the official platform, while dozens of organizations submitted detailed memoranda directly to the ministry and the Tax Department.

Accountants Warn Against Competitiveness Risks

One of the most vocal opponents has been the Institute of Certified Public Accountants of Cyprus (ICPAC/SELK). The organization submitted more than 230 objections and recommendations, examining each article of the draft bills.

While ICPAC acknowledged the need for modernization and supported greater transparency and simplification, it warned that the current proposals could harm competitiveness. In a letter to Finance Minister Makis Keravnos, it strongly objected to raising the corporate tax rate from 12.5% to 15% without offsetting measures. “We would have agreed with the increase provided it was balanced with changes to maintain today’s effective corporate tax rate,” ICPAC stressed, adding that none of its earlier proposals had been adopted.

Businesses Welcome Some Measures but Remain Cautious

The Cyprus Chamber of Commerce and Industry (CCCI/KEBE) submitted 24 comments, welcoming positive changes such as abolishing deemed dividend distribution for local companies and reducing the special defence contribution from 17% to 5%.

However, it warned that raising corporate tax could erode Cyprus’s competitiveness if not paired with transitional measures and broader strategies to enhance productivity and innovation.

Stock Exchange Raises Concerns Over Unequal Treatment

The Cyprus Stock Exchange (CSE) focused on potential disparities between its Regulated Market and the Emerging Companies Market. It argued that exempting only the Regulated Market from dividend and interest taxation would put smaller firms at a disadvantage, contradicting the reform’s goal of supporting entrepreneurship.

The CSE also suggested additional incentives, including reduced taxation for dividends from listed companies, tax breaks for long-term investors, and support for green bonds.

>>Tax Reform in Cyprus Faces Strong Headwinds as Political, Business Opposition Mounts<<

Wider Social Concerns Over Tax Reform

Other stakeholders raised broader social and sector-specific concerns:

• Provident Fund of SEK workers: Opposed taxation of provident fund income, warning of reduced retirement benefits.

• University rectors: Called for 200% tax deductions for companies investing in university research to encourage private R&D.

• Insurance intermediaries: Objected to changes affecting unit-linked insurance products.

• Large Families Association: Criticized perceived unfair treatment of middle-income households, pressing for higher child allowances.

• Land Developers Association: Advocated replacing limited green renovation tax incentives with direct grants tied to actual renovation costs.

Ministry Signals Adjustments Ahead

Despite widespread criticism, the Ministry of Finance has shown readiness to amend the package. Minister Keravnos confirmed that a controversial clause allowing the Tax Commissioner to set executive salaries will be removed. Additional safeguards may also be added to anti-tax evasion measures, with further dialogue planned.

Though the official consultation period has ended, discussions will continue. The Tax Commissioner is set to meet with sectoral representatives in the coming days, while the minister will present the reform to political parties on 15 September.