Political parties appear close to finalising Cyprus’ tax reform package after intensive behind-the-scenes negotiations, with the House finance committee continuing closed-door discussions on Wednesday. Representatives from Disy, Diko, Dipa and Edek met finance minister Makis Keravnos on Tuesday and signalled strong convergence on a comprehensive set of changes aimed at supporting lower and middle-income households.
The emerging agreement centres on raising the tax-free income threshold to €22,000- a more substantial increase than the government’s initial proposal of €20,500. The current threshold is €19,500. Keravnos confirmed the government is prepared to accept a higher limit, noting that the ministry has identified which measures can be approved without jeopardising the budget.
New tax brackets and expanded family deductions
According to information provided to SIGMA, the parties also agreed on a revised set of income tax brackets under the tax reform proposal:
- €0–€22,000: 0%
- €22,001–€32,000: 20%
- €32,001–€42,000: 25%
- €42,001–€72,000: 30%
- €72,001 and above: 35%
Sources also indicated agreement on a stepped increase in child-related tax reliefs. Under the emerging arrangement, families would receive:
- €1,000 for the first child
- €1,250 for the second child
- €1,500 for the third child
The income ceiling for accessing these deductions will rise to €90,000 and will scale upwards depending on the number of children.
In addition, tax relief for mortgage interest on a primary residence or rent for a main home- previously capped at €1,500 in the submitted bills- is expected to increase to €2,000.
Positions of the parties and next steps
Diko MP Christiana Erotokritou said the agreed amendments will be formally submitted to the finance committee on Thursday. Disy MP Onoufrios Koullas stressed that discussions remained within fiscal limits to ensure the country’s financial stability, while Dipa MP Alekos Tryfonides underlined the goal of achieving the best outcome for households, businesses and the wider economy.
Akel, excluded from the negotiations, criticised both the government and other parties for bypassing parliamentary norms. Party leader Stefanos Stefanou expressed frustration, noting that many of the ideas being discussed closely resemble Akel’s long-standing positions on tax reform.
Disy, Diko, Dipa and Edek collectively hold a majority in the House, paving the way for the package to advance to the plenary session on 22 December. The reform, expected to take effect on 1 January 2026, carries an estimated annual fiscal cost of around €110 million.
Also read: Cyprus tax reform open to evidence-based suggestions
For more videos and updates, check out our YouTube channel
