Insights

Modernisation of the Tax System of Cyprus: Key Notes and Recommendations

Christos Theophilou 13 Jun 2025

An overview by STI Taxand, Taxand Cyprus

Christos A. Theophilou, Demis Ioannou and Costas Savva from our Cypriot member firm STI Taxand have recently took part in the public consultation on Cyprus’ tax reform. Their contribution focused on aligning the tax system with international standards while preserving Cyprus’ economic competitiveness.

The team highlighted several concerns regarding the current proposals, particularly their potential impact on investment and economic performance, including:

• Raising the corporate tax rate from 12.5% to 15% could hurt investment and GDP; keeping it at 12.5% supports economic stability.
• A proposed 5% withholding tax on dividends raises complexity and constitutional concerns.
• Emphasised the importance of tax neutrality in business decisions.

To support sustainable growth and maintain Cyprus’ role as a leading international financial centre, the team proposed the following measures:

• Retain the 12.5% corporate tax rate.
• Simplify dividend taxation fairly for all taxpayers.
• Consider Estonia’s reinvestment-focused tax model.
• Expand Cyprus’ tax treaty network.
• Introduce strong R&D incentives to drive innovation.

You can read the full overview of the contribution to the consultation here.

Article tags

Compliance | Cyprus | International Tax | Investments | Tax | Tax Reform | Withholding Tax