Proposed Tax Reforms to Revitalize Cyprus’s Economy
In a bold move to invigorate the Cypriot economy, employers across the island are advocating for a sweeping reform of the national tax system. Their proposals are multifaceted, targeting individual tax rates, corporate taxation, and incentives for green investments.
One of the key changes proposed is the reduction of taxes on interest earned from savings to a mere 10%, a measure aimed at encouraging personal saving and investment. To further alleviate the financial burden on individuals, employers suggest raising the tax-free threshold, reflecting the increased cost of living witnessed over the past two decades.
The introduction of a “mortgage relief” program is also on the table. This initiative would allow homebuyers to deduct loan interest from their taxable income, thereby increasing disposable income and potentially stimulating further economic activity. In a nod to modern family dynamics, the option for couples and single parents to file taxes separately or jointly is also being proposed.
On the corporate front, significant changes are being pushed forward. The call for the elimination of taxes on certain dividends is designed to ease the financial load on companies. To align with EU regulations, a corporate tax rate increase to 15% is proposed, alongside a substantial reduction in the tax rate on dividends from 17% to 5%. Employers also recommend making a 50% deduction on transfer fees a permanent fixture to support ongoing business operations.
Beyond these measures, employers are looking at the bigger picture, suggesting a reduction in capital gains tax to 15% and advocating for simplified transfer pricing rules for small businesses. They propose allowing companies to carry back losses for up to three years and carry them forward for 10 years. To foster a more dynamic business environment, tax incentives for mergers and acquisitions, as well as tax breaks for startups and investments in research and green sectors, are being proposed.
Employers are not overlooking the importance of green taxation. They recommend tax breaks for investments in eco-friendly industries and incentives for purchasing energy-efficient buildings and solar panels. This focus on sustainability is indicative of a forward-thinking approach to economic growth.
Finally, the push for reform extends to streamlining municipal taxes and revising stamp duty laws, rounding off a comprehensive package aimed at making Cyprus more competitive and economically robust.
