Selk welcomes tax reform vote, stresses need for careful implementation

The Cyprus Institute of Certified Public Accountants (Selk) welcomed the passage of Cyprus’ long-awaited tax reform by the House of Representatives, saying the vote marks a major institutional shift after more than two decades without a comprehensive overhaul of the tax system.

The reform, which will come into force on January 1, 2026, was described by Selk as “a significant institutional milestone for the tax system of the Republic of Cyprus, following a period of more than 23 years without an overall and structural review”.

The institute said the new framework “reflects the need to modernise the tax system so that it can respond more effectively to contemporary economic conditions, international developments and the increased demands for transparency, simplicity and tax justice”.

“The adoption of the tax reform constitutes a substantive institutional development that creates the conditions for a more modern, coherent and functional tax system,” Selk president Odysseas Christodoulou said in a statement.

“Its effectiveness, however, will depend to a large extent on the rational, consistent and timely implementation of the new provisions in practice,” he added.

What is more, Selk also reaffirmed its institutional role as a technocratic partner to the state.

It said it that remains available “to contribute constructively, through its expertise, to supporting a smooth transition to the new tax regime and to safeguarding the long-term credibility and stability of the tax system”.

The statement marks a shift in tone compared with Selk’s original position during the consultation process, when it raised extensive concerns over the government’s six-bill reform package and submitted multiple rounds of technical observations to parliament’s finance committee.

While approaching the reform with what it described at the time as a positive mindset, Selk had warned that several provisions risked undermining competitiveness, creating legal uncertainty or shifting the tax burden onto labour rather than addressing abuse.

Among its key objections were proposed changes to corporate tax residency rules, which it said could increase the risk of double taxation and weaken Cyprus’ position in cross-border disputes, as well as plans to raise the corporate tax rate from 12.5 to 15 per cent.

The institute had also criticised aspects of the special defence contribution, the taxation of cryptocurrency transactions, hidden dividend rules and expanded discretionary powers for the tax commissioner, while calling for the abolition of stamp duty altogether.

Despite these reservations, Selk’s latest statement focuses on the institutional significance of the reform and the importance of its implementation, rather than reopening points of disagreement.

Meanwhile, other business and professional bodies have also reacted positively following parliament’s approval of the package earlier this week.

The Cyprus Employers and Industrialists Federation (Oev) described the timely passage of the bills as a sign of effective coordination and institutional maturity, saying the legislation was processed quickly without compromising quality despite the parallel handling of the state budget.

“They were processed at speed without compromising the quality of the final outcome,” Oev said, while also praising the Finance Ministry and the tax department for engaging constructively with documented proposals from the business community.

Moreover, the Cyprus Chamber of Commerce and Industry (Keve) likewise welcomed the vote, saying the reform “marks a historic step” in modernising the tax system and strengthening competitiveness.

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

It added that measures such as the abolition of deemed dividend distribution and the reduction of defence contribution on dividends to 5 per cent enhance predictability and investment confidence.

The Finance Ministry has also hailed the reform as “an emblematic initiative”, saying its implementation from January 2026 will ease tax burdens for households and businesses while reinforcing social justice and Cyprus’ investment appeal.

“The new tax framework is a social and political choice that implements the vision of the Christodoulides government for a fairer, more productive and more resilient Cyprus,” the ministry said.

The reform raises the personal income tax-free threshold to €22,000, restructures tax bands, introduces expanded family allowances and abolishes stamp duty, while increasing the corporate tax rate to 15 per cent and overhauling the defence contribution regime.

While opposition voices have criticised the speed of the legislative process and the limited relief for lower-income earners, the reform has drawn broad support from professional and business institutions, with Selk now placing emphasis on execution rather than design.