Cyprus to increase corporate income tax rate to 15%

Finance Minister Constantinos Petrides announced on 9 December that Cyprus would proceed with tax reforms in 2022, including increasing the corporate income tax rate to 15% and introducing green taxation to achieve its environmental targets.

Presenting the 2022 Budget to the House of Representatives, Petrides referenced the global tax reform agreement for the imposition of a minimum global corporate tax rate of 15% reached by 137 countries in the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) in October.

The objective of the Budget was to have a fairer and fiscally neutral tax reform that would be completed within 2022. He stated that the increase of the corporate tax in Cyprus from 12.5% to 15% would not substantially affect the foreign investments in Cyprus because the country had other comparative advantages as an investment destination that would balance this small increase in the corporate tax rate.

Apart from the increase in corporate taxation, the Cyprus government would consider the reduction or abolition of the special defence contribution on deemed or real distribution of dividends, the reduction of the rate of special defence contribution on interest income, and the reduction or abolition of the €350 annual company levy.

The reform, he added, would also include the introduction of carbon taxation, the gradual increase of taxation on fossil fuels and the introduction of environmental levies.