The government is “willing to accept some increase” in the income tax-free threshold from its initially planned figure of €20,500 per year, Finance Minister Makis Keravnos said on Tuesday.
Speaking after meetings with representatives of political parties Disy, Diko, Edek and Dipa, he said there was a “great convergence of views”, and that as such, “I expect that within the margins that the government has accepted, amendments will be submitted by the parties”.
Once these amendments are submitted, he said, “we can move forward with the tax reform”.
Cyprus’ income tax-free threshold has sat at €19,500 per year since the country introduced the euro in 2008, while President Nikos Christodoulides in February announced plans to increase that figure by €1,000 as part of a wider tax reform package.
However, political parties last week said they believe that figure can rise further still, with House finance committee chairwoman and Diko MP Christiana Erotokritou saying she believed the government could do more.
Akel MP Andreas Kafkalias, meanwhile, said it would be his party’s preference for the tax-free income threshold to €22,500 per year, while Dipa MP Alekos Tryfonides said his party wished for it to be increased to €21,500 per year.
Both Akel and Dipa also spoke of other suggestions, with Kafkalias last week saying that Akel had submitted proposals to introduce a new tax on real estate which is valued at over €3 million, as well as a new levy on “large companies” and a reduction of value added tax to five per cent on electricity and “energy upgrades” and zero on “basic necessities”.
Additionally, he referred to a proposal put forward by his party to introduce a windfall tax on energy companies and banks.
Tryfonides said Dipa had also suggested increases in tax exemptions for people with dependents, compared to the government’s currently planned exemptions, and the provision of a new exemption for single-parent families, who, under the government’s proposal, would receive double the ringfenced €1,000 tax-free amount per child.
Dipa’s proposals, he said, fall within the government’s fiscal margin for 2026, thus “leaving room for the government to further strengthen vulnerable groups” without adding to the national debt.
When Christodoulides set out the plans, he said in addition to the tax-free threshold increase and €1,000 extra per child, other tax exemptions are set to be granted to other groups.
The plan also foresees €1,500 of tax-free income for every parent who is either buying their first house or renting, and €1,000 for a “green investment” on the part of every parent.
Single parents will receive double the ringfenced tax-free amount
The plans also foresee that Cyprus’ 35 per cent top income tax rate would only apply to those earning more than €80,000 per year, rising from its current level of €60,001.
At the same time, he said corporation tax will increase from 12.5 per cent to 15 per cent, bringing Cyprus in line with European Union requirements.
