On December 9, 2021, the Minister of Finance of Cyprus delivered a presentation to Parliament on the State Budget for 2022. In his speech, the minister discussed plans for comprehensive tax reform measures to be agreed and completed in 2022.
The reform contains the following changes to the tax legislation of Cyprus:
- Raising the corporate tax rate from 12.5% to 15%, taking into account the OECD global tax reform agreed with Cyprus;
- Reduction or cancellation of the extraordinary contribution to the accrued and / or actual distribution of dividends;
- Reduction of the defense contribution rate for interest on the loan;
- Reduction or cancellation of the corporate tax of 350 euros;
- Introducing a carbon tax with a gradual increase in taxes on fossil fuels, and introducing environmental charges to meet environmental goals;
- VAT rate adjustment based on recent ECOFIN decision, especially for products or services related to public health and green and digital transitions.
Recall that by the end of 2025, the Cypriot authorities plan to pass a number of laws with the aim of carrying out reforms in the field of taxation and other areas. This requirement was put forward by the European Commission for the possibility of Cyprus receiving a subsidy from the EU in the amount of 1.2 billion euros to restore the economy.
It is also planned to adopt an amendment to the Income Tax Law to expand the existing framework for investing in innovative businesses in the context of strengthening research and innovation, as well as to adopt amendments related to the sale of real estate to address deficiencies in this legal institution.
