The Cyprus Chamber of Commerce and Industry (Keve) on Monday welcomed parliament’s approval of Cyprus’ long-awaited tax reform.

The chamber said the overhaul “marks a historic step” in modernising the country’s tax system and strengthening competitiveness at a time when the economy is seeking sustainable growth and investment.

In its statement, Keve said the adoption of the reform laws represents “a milestone modernisation that aligns the tax framework with the realities of the contemporary economy and lays the foundations for a competitive and sustainable economic model“.

According to Keve, the reform “offers a historic opportunity to upgrade Cyprus’ competitiveness by reinforcing stability, transparency and the island’s international appeal as a business and investment destination”.

The chamber also welcomed the fact that long-standing proposals from the private sector were incorporated into the final framework, shaping what it described as a more functional and development-oriented tax system.

Among the changes highlighted by Keve are the abolition of deemed dividend distribution and the reduction of the defence contribution on dividends to 5 per cent, measures which it said “enhance predictability and investment confidence”.

Throughout the institutional dialogue, Keve said it “prioritised legal certainty and stability in the business environment“.

In addition, it stressed that “targeted interventions helped balance revenue-raising measures with clear limits and judicial oversight in order to protect healthy enterprises”.

It further stated that the final package avoided provisions that could have created uncertainty for the operation of boards of directors or undermined Cyprus’ headquartering philosophy, while preserving incentives that support outward-looking activity and the attraction of investment.

Keve also underlined the social dimension of the reform, pointing to the increase in the tax-free income threshold and targeted family support measures that are expected to “strengthen household disposable income and help address low birth rates”, described as one of the country’s most serious national challenges.

The chamber also said stronger social cohesion is a prerequisite for sustainable growth and a resilient domestic market.

“We believe that the approval of the tax reform marks a new starting point for the Cypriot economy,” the organisation said.

It added that “Keve acted with consistency, responsibility and well-documented proposals that were heard and incorporated into the new framework”.

“We remain committed to transparency and compliance, with the aim of accelerating investment, supporting innovation and strengthening small and medium-sized enterprises, the backbone of our economy,” it said.

Keve also said it will continue to closely monitor the implementation of the reform, positioning itself as “a reliable and institutional partner of the state in promoting economic progress and social prosperity”.

The statement follows Monday’s parliamentary vote approving five government bills that together form the most sweeping tax reform in years, with the legislation set to come into force next month.

The package raises the personal income tax-free threshold to €22,000, introduces a series of deductions for households and businesses, and increases the corporate tax rate to 15 per cent.

Finance Minister Makis Keravnos said after the vote that the new framework will support continued economic growth, improve competitiveness and provide effective support to Cypriot households, while also helping attract quality foreign investment.

The reform also restructures the defence contribution by abolishing it on deemed dividend distributions for profits after 2026, reducing it to 5 per cent on actual dividend distributions and eliminating it on rents, alongside anti-abuse measures targeting concealed distributions.

Additional regulations were approved on the taxation of interest, dividends and income of non-residents.

Amendments reflecting proposals by Disy, Diko, Dipa and Edek were incorporated, including broader tax allowances for children and an increase in the capital gains tax-free threshold to €30,000, with agricultural plot sales exempt up to €50,000.

While the bill on capital gains taxation passed unanimously, the remaining bills were approved by majority votes, amid criticism from opposition Akel, which argued that the reforms offered limited relief for lower-income earners and were rushed through parliament with insufficient scrutiny.