The new green tax reform is being prepared by the Ministry of Finance and aims to shift the tax burden from wages to environment polluting activities. At the same time, the circular economy will be boosted and the consumption of basic goods, such as energy and water, will be burdened.

The study of the new tax reform was assigned to the University of Cyprus, which has the capability to cooperate with various experts. The study’s estimated time to completion is up to two years. However, the Ministry aims to adopt part of the tax reform earlier, before the study is concluded.

As mentioned above, one of the main objectives of the reform is to impose high tax rates on activities that harm the environment. The Ministry of Finance, under the guidance of Finance Minister, Makis Keravnos, seeks a tax reform following a thorough and integrated study that will approach Cyprus’ tax framework in a holistic way and will take into account global and European macro changes and challenges.

The primary ambitions of the reform, as determined by the Ministry, are to increase the competitiveness of Cyprus' tax model, to reduce bureaucracy for taxpayers and to achieve a fairer redistribution of the tax burden, while maintaining fiscal neutrality.

Thus far, information on the matter indicates that the UCY study will focus on issues such as reducing taxation on income generated from employment and promoting the circular economy model by introducing tax incentives for businesses that will engage, e.g., in waste reduction. In addition, the UCY study will focus on possible compensatory measures, mainly in the form of grants, that will benefit various socially vulnerable groups.

Upon completion of the study, there will be a public briefing and consultation with all stakeholders involved, who will be called upon to present their proposals and share their thoughts.

The Minister of Finance who is in favor of adopting a new tax reform, has clarified that the reform should be fair and fiscally neutral.

As part of the remodeling, an increase in the untaxed level of income will be examined, as well as an increase in the corporate tax rate. Furthermore, the Ministry considers to reduce or even abolish the extra tax on dividends, cut down the tax contribution on credit interest and lower or abolish the €350 company fee.

Likewise, the Ministry studies the imposition of environmental taxes and the readjustment of VAT rates for products and services related to public health.

The Institute of Certified Public Accountants of Cyprus (ICPAC), as the responsible body for tax examination, already believes that tax reform should be comprehensive and take into account the new economic conditions. Besides, ICPAC has rooted for a modernized, more functional and more user-friendly tax framework, by abolishing unnecessary taxes and reducing bureaucracy.

Makis Keravnos underlines that the new tax reform will be successful, if a better and fairer distribution of income is implemented, the enrichment of the economy with new sectors is supported, the existing sectors are strengthened and the generated wealth is properly distributed.