Cyprus Tax Reform Sparks Mixed Reactions from Business Community

As the public consultation on Cyprus’ forthcoming tax reform concludes today, two of the country’s leading business bodies—the Cyprus Chamber of Commerce and Industry (Keve) and the Institute of Certified Public Accountants of Cyprus (Selk)—have expressed sharply contrasting views, offering both endorsement and criticism of the government’s plans.

In a six-page memorandum, Keve praised the government’s determination to clamp down on tax evasion and enhance collection, calling these efforts “a cornerstone for transparency and fairness in the market.” At the same time, the chamber issued a cautionary note, warning that any changes must not erode Cyprus’ long-standing advantage as a competitive tax jurisdiction that has helped attract substantial foreign investment.

Keve underscored the need for reforms that balance the interests of domestic enterprises across commerce, services, and industry with the island’s global appeal as an investment hub. “This balance is decisive for strengthening the Cypriot economy, both by supporting domestic enterprises and by attracting foreign investors,” the chamber stated.

The organization voiced approval of several key proposals, including the abolition of deemed dividend distribution for companies operating solely within Cyprus and the reduction of the special defence contribution rate from 17 per cent to 5 per cent. These changes, it said, had been among the business community’s most persistent demands.

Keve also welcomed the Ministry of Finance and Tax Department’s intensified focus on combating tax evasion, stressing that such efforts must be pursued “within a framework of balanced fiscal policy” and carefully structured to avoid undermining Cyprus’ competitive edge.

Addressing corporate taxation, the chamber highlighted that while the statutory rate will rise to 15 per cent across the board, Cypriot businesses would actually benefit from lower effective taxation in practice. It pointed out that the maximum effective tax rate would fall to 19.25 per cent from the current 27.4 per cent, while the minimum would drop to 15 per cent from today’s 23 per cent.

In stark contrast, Selk adopted a more critical position in its submission, voicing opposition to nearly all aspects of the draft legislation. Alongside its objections, the institute advanced its own reform suggestions, with president Odysseas Christodoulou stressing the importance of safeguarding Cyprus’ status as a trusted and high-quality business hub.

“With the constant upgrading of the products and services offered, as well as through the simplification, strengthening and effective implementation of the country’s internal structures, processes and operations, we can deliver value-added services at competitive cost,” Christodoulou wrote in a letter addressed to Finance Minister Makis Keravnos.

Selk further insisted that any tax framework must rest upon three central pillars: competitiveness, fiscal sustainability, and the protection of social welfare.

The accountants’ institute has already scheduled an extended meeting with the Tax Commissioner for September 10, 2025, where its leadership intends to engage in a comprehensive exchange of views on the proposed reform.

By fLEXI tEAM