The guidelines of the forthcoming tax reform, which will provide for an increase in corporate taxation and a reduction of a number of other taxes and fees imposed on businesses, were described by the Minister of Finance Konstantinos Petridis during his speech in the plenary session of the Parliament on the 20th budget. reform will also have a green dimension with the introduction of a tax on coal use.
In particular, the corporate tax rate will increase to 15% from the current 12.5%, as a result of the global tax reform .
“In our estimation, the increase of the corporate tax in Cyprus from 12.5% to 15% will not substantially affect the foreign investments in Cyprus. “Cyprus has such comparative advantages as an investment destination, which exceed this small increase in the corporate tax rate”, Mr. Petridis estimated.
This increase is inevitable, as the European Commission is expected to present A relevant directive on the implementation of the Global Tax Agreement in the EU is coming soon.
Mr. Petridis added that “this proposed global tax reform provides the Republic of Cyprus with the opportunity to improve the national tax framework by reducing the administrative burden, while reducing the tax burden on businesses, so that to ensure the neutrality of the promoted reform “.
The Minister of Finance announced that in the immediate future, in the context of a comprehensive tax reform, Tax issues will be considered in a holistic way, such as:
Increasing the corporate tax rate.
Reducing or eliminating the extraordinary contribution on the calculated and/or actual dividend distribution.
The reduction of the rate of imposition of the defense contribution on the credit interest.
The reduction or abolition of the corporate fee of € 350.
The introduction of the carbon tax with the gradual increase of taxes on fossil fuels, as well as the imposition of environmental fees to achieve environmental objectives.
The adjustment of VAT rates based on the recent decision of ECOFIN, especially for products or services related to public health and the green and digital transition. Once VAT rules come into force, Member States will be able to exempt for the first time from VAT certain listed goods and services that are considered to meet basic needs.
“After about 20 years, the fiscal reform is a necessity. Our goal will be to strengthen the competitiveness of the Cypriot economy and Cyprus as a business center, to reduce tax inequality, to strengthen the transparency and simplification of our tax system and to reduce the administrative burden. “My commitment is that, within 2022, the consultations with the involved bodies, social groups and parliamentary parties will be finalized so that the relevant proposals can be submitted”, added Mr. Petridis.
