Cyprus Tax Reform 2024: Beyond Green Initiatives
Cyprus is gearing up for a sweeping tax reform set to launch in the spring of 2024, promising changes that extend far beyond environmental concerns.
This comprehensive overhaul is poised to reshape the landscape of corporate tax, income tax, capital gains tax, stamp duties, and various other forms of taxation. Its primary objective? To redistribute the tax burden away from labor, aiming to combat tax evasion and shadow economy practices.
Outlined by the Ministry of Finance to the Parliament, this reform amalgamates diverse tax policies. Its blueprint factors in effectiveness, redistributive impact, tax compliance, and administrative efficiency.
This upcoming tax framework, as detailed by the Ministry, will blend elements from both green and digital transitions. Aligned with the EU’s Recovery and Resilience Plan and international standards, it’s a crucial step in modernizing Cyprus’ tax structure.
The initial phase, slated for the first quarter of 2024, introduces a green tax, commencing with levies on fuels. These changes will be accompanied by compensatory measures aimed at cushioning the impact on sectors affected by these new taxes. Details regarding the precise rates and nature of these compensations are yet to be finalized, but this green tax is a prerequisite for the country’s Recovery and Resilience Plan.
The reform isn’t solely about environmental matters. It also focuses on vital aspects:
- Encouraging investment through tax policies that reduce business risks and incentivize research funding. Streamlining the tax system and lowering tax costs are expected to foster innovation and enhance competitiveness.
- Redistributing the tax load away from labor toward other forms like consumption, green taxation, and real estate, aiming to bolster employment. Labor taxation in the EU is notably higher compared to similar economies.
- Implementing green taxation to encourage environmentally friendly practices and discourage polluting activities. Recognizing its impact on lower-income groups, measures to counterbalance this effect are anticipated.
- Tackling shadow economy practices and mitigating tax evasion, crucial issues in Cyprus contributing significantly to the GDP. The reform endeavors to confront and resolve these challenges.
The Ministry’s collaboration with the University of Cyprus for a comprehensive two-year study, potentially extended by six months, highlights the seriousness of this reform, with a budget totaling €1.02 million.