Cyprus is rolling out the biggest tax shake-up in over 20 years, promising a fairer system that supports families, strengthens local businesses, and keeps the economy competitive.

According to President Nikos Christodoulides, the reform plan, approved by the Council of Ministers and now headed to Parliament for a vote, is being billed as one of the most important structural changes since Cyprus joined the EU. It aims to make taxes simpler, fairer, and better aligned with today’s economic reality, while staying fiscally neutral so it doesn’t blow a hole in public finances.

Government officials say the new framework, based on a detailed study by the University of Cyprus’ Center for Economic Research, promotes social cohesion and economic growth while ensuring Cyprus remains an attractive place to work and invest.

For the first time in 20 years, the tax-free threshold for all individuals will rise by 1,000 euros to €20,500 and could exceed €24,500 depending on family circumstances and eligible deductions. The new tax structure also tackles what the government calls “distortions” that previously favored large, foreign-owned firms. 

The corporate tax rate will be set at 15%, in line with global standards. Meanwhile, the tax on actual dividends will be cut from 17% to 5%, encouraging companies to reinvest profits in productive ventures rather than move them abroad.

Cypriot-owned companies stand to benefit most, with the government saying the changes will “correct a real imbalance” and give local entrepreneurs a fairer footing.

To promote innovation, businesses will now get an enhanced 120% tax deduction on research and development spending, and for the first time, individuals will also receive tax breaks for green investments.

The plan also aims to reduce bureaucracy, reducing stamp duty to essential transactions, allowing losses to carry forward for seven years instead of five, and updating special tax regimes and capital gains exemptions. 

Officials say these steps will boost transparency and predictability, key to attracting investors who want a stable environment to plan long-term. 

The government argues that the timing for reform is right. Cyprus is projected by both the EU and the IMF to remain one of Europe’s fastest-growing economies, with one of the lowest inflation rates.