The tax department is “putting the final touches” on bills which, if passed into law, will bring about sweeping changes to Cyprus’ tax system, according to reports on Friday.

The Cyprus News Agency (CNA) reported that it is hoped the bills will be sent to the legal service for review as soon as next week, with them set to then be submitted to parliament following the summer recess.

“In essence, the bills have been completed and only some details remain. We can say that today, their preparation is being completed,” CNA quoted a source as saying.

The source added that the bills will be put up for public consultation “around July 9”, with the finance ministry then set to “evaluate the comments received” and “incorporate some of them into the final text of the bills”.

“Approximately two months will be required for the legal review of the bills and for public consultation,” the source said.

The government has aimed for the tax reforms to be implemented at the beginning of next year, with President Nikos Christodoulides having set out the plans in February.

Then, he had said he planned to raise the tax-free income threshold to €20,500 per year, an increase of €1,000 from its current level, at which it has sat since Cyprus introduced the Euro in 2008.

Additionally, Cyprus’ 35 per cent top income tax rate will now only apply to those earning more than €80,000 per year, rising from its current level of €60,001.

Christodoulides promised his reforms will strengthen Cyprus’ middle class, which he described as the “foundation of every prosperous and democratic society”.

The most notable of his planned reforms is the increase in individuals’ tax-free incomes, while he also promised a “series of significant tax deductions which take into account the needs of households and the composition of the family”.

In addition to the €1,000 additional tax-free amount, parents will receive an extra €1,000 for every dependent they have, while Christodoulides’ plan also foresees €1,500 of tax-free income for every parent who is either buying their first house or renting, and €1,000 for a “green investment” on the part of every parent.

Single parents will receive double the ringfenced tax-free amount.

Christodoulides also promised that young people will be “essentially supported” with tax relief incentives for parents, which he said will “further encourage the employment of women and respond to structural, long-term distortions”.

On the matter of businesses, he said the government plans to completely abolish deemed dividend distribution payments and “significantly reduce” the withholding tax on the distribution of actual dividends from 17 per cent to five per cent.

At the same time, he said corporation tax will increase from 12.5 per cent to 15 per cent, bringing Cyprus into line with European Union requirements.