Marios Yenagrites: “The revision of corporate tax residency rules is expected to enhance the country’s tax framework”

Following the recent unveiling of Cyprus’ tax reform proposals by the Economics Research Centre of the University of Cyprus (CypERC), Marios Yenagrites, Tax Manager at Totalserve, shared his perspective on the potential impact of these changes.

In comments to CBN, Yenagrites noted that the proposed adjustments to corporate taxation, including an increase in the corporate tax rate from 12.5% to 15%, reflect global trends while maintaining Cyprus’ competitive edge. Key incentives such as the Notional Interest Deduction, the IP box regime, and the shipping tax framework remain intact. The revision of corporate tax residency rules is expected to enhance the country’s tax framework, while the reduction of Special Defence Contribution (SDC) on dividends from 17% to 5%, along with the abolition of the Deemed Dividend Distribution provisions, improves the tax efficiency for businesses and investors.

On the personal taxation front, the tax-free threshold will increase to €20,500, with adjusted tax bands leading to a 35% top rate for incomes above €80,000. Tax allowances will be introduced for families with children under a certain income level. The non-domiciled tax status remains, with the possibility of extending the 17-year period upon payment of an annual fee. Additionally, the expansion of the 60-day rule to include individuals whose centre of business interests is in Cyprus, regardless of physical presence, offers greater flexibility for tax residency.

While the proposals are still subject to approval and further refinement, Yenagrites noted that they represent a step in the right direction toward a more competitive and balanced tax system. "The reforms aim to improve Cyprus’ attractiveness for businesses and individuals while ensuring a fairer distribution of the tax burden. The coming months will be important as discussions continue, and a clear, well-implemented framework will be essential for a smooth transition," he concluded.