On February 26, 2025, President Nikos Christodoulides announced a set of proposed tax reforms that could significantly impact businesses and individuals in Cyprus. However, it is important to emphasize that these changes have not yet been enacted into law and are still subject to review, consultation, and possible amendments.
Key Proposed Changes
- Corporate Income Tax Increase: The proposal suggests increasing corporate tax from 12.5% to 15%, aligning Cyprus with international tax trends.
- Drastic Reduction in Dividend Withholding Tax: If approved, the withholding tax on actual dividend distributions will drop from 17% to 5%. This would make Cyprus one of the lowest personal tax jurisdictions globally for entrepreneurs operating private businesses, as dividends would be taxed at just 5%, regardless of domicile status.
- Abolition of Deemed Dividend Distribution (DDD): The proposal includes removing DDD entirely, simplifying corporate tax obligations for businesses and investors.
- Increase in Personal Tax-Free Income: The tax-free threshold for individuals would increase from €19,500 to €20,500, providing tax relief to many taxpayers.
- New Tax Deductions: Additional relief measures are proposed for families, children, and vulnerable groups, reducing social inequalities.
These Changes Are Not Yet Law – What Comes Next?
These tax reforms remain proposals and will undergo further consultations with economic experts, business organizations, and other stakeholders. Any final decisions on implementation and potential amendments are expected in the coming months, with possible enactment in 2025.
What This Means for Businesses and Investors
While these proposals signal potential tax shifts, they have not yet taken legal effect. Businesses, entrepreneurs, and investors should stay informed and prepare for possible changes, but no immediate action is required.
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