Parliament approved the long-awaited sweeping tax reform package on Monday, voting through five bills submitted by the government.

The legislation, set to take force next month, includes major changes to personal and corporate income taxation, and introduces a series of deductions aimed at households and businesses.

The reforms, which passed with a majority, raise the income tax-free threshold to €22,000.

At the same time, the corporate tax rate will increase to 15 per cent.

Speaking after the vote, Finance Minister Makis Keravnos said the new framework will lead the country’s economy to continued growth, improve competitiveness and effective support for Cypriot households in the coming years.

He described the reform as a fairer tax system while attracting quality foreign investments.

The package also reforms the defence contribution, abolishing it on deemed dividend distributions for profits after 2026, reducing the rate to five per cent on actual dividend distributions, and eliminating it on rents while introducing anti-abuse measures for concealed distributions.

Regulations were also passed on the taxation of interest, dividends and income of non-residents.

The reform passed with amendments, reflecting proposals by the four main supporting parties, Disy, Diko, Dipa and Edek.

Among the changes were broadening tax allowances for children and raising the tax-free threshold on capital gains to €30,000, with agricultural plot sales exempt up to €50,000.

Only the bill on capital gains taxation passed unanimously, with other bills approved by majority votes.

Keravnos said the reforms were aimed at helping middle-income households while ensuring stability for businesses and attracting foreign investment.

He added that the reform drastically reduces the tax burden on households, especially those with children, effectively supporting vulnerable groups and the middle class.

Critics lamented that the reforms provided limited benefit for lower-income earners and raised concerns over the rushed schedule allowed for parliamentary scrutiny.

Opposition party Akel had sought higher thresholds and additional credits for families with children and for those with disabilities, as well as permanent VAT reductions on electricity and essential items and taxation of windfall profits of banks and renewable energy companies, but most of these proposals were not adopted.