The Cyprus Institute of Certified Public Accountants (CIPAC) has raised a series of concerns over the government’s six-bill tax reform package, submitting detailed notes to the House finance committee and signalling that more comments will follow as discussions progress.

Although the association says it is approaching the reform with a positive mindset, it stresses that the final legislation must genuinely support businesses, households and the wider economy.

So far, the institute has submitted four sets of observations, covering amendments to the income tax law, the special defence contribution law, the capital gains tax law and the stamp duty law, as also mentioned in the InBusinessNews outlet.

Two further submissions are planned, while the institute has left open the possibility of adjusting its positions once the Finance Ministry provides more clarity during parliamentary deliberations.

One of its main concerns relates to the government’s attempt to change the rules that determine when a company is considered tax resident in Cyprus.

CIPAC warns that the proposed wording could increase the risk of double taxation and lead to lengthy dispute-resolution procedures with other jurisdictions.

In many cases, it says, Cyprus would lose these disputes because management and control often lie abroad, an outcome the existing framework was designed to avoid.

To address this, the institute suggests adopting the notion of a “treaty non-resident”, similar to the British model.

Under such an approach, if a tax treaty determines that a company is resident elsewhere, Cyprus would not require the company to comply with local obligations such as withholding taxes or technical filings, ensuring it is not treated as Cypriot-resident for purely domestic purposes.

The institute also raises concerns about provisions that, in its view, amount to taxing labour rather than tackling abuse. It argues that these changes would make it harder for Cyprus to attract high-skilled professionals, especially when existing anti-avoidance rules already give the tax department the tools it needs.
If the government ultimately proceeds, CIPAC recommends introducing a tax-free threshold, such as the first €100,000 of income, and allowing employers to deduct the proportional cost of the affected salaries.

On the taxation of cryptocurrency transactions, the association calls for the relevant section of the bill to be rewritten entirely.

Until that happens, it recommends broadening the scope so that all crypto-related transactions are included rather than just purchases and sales.

It also believes that only commercial profits should be taxed, that losses should be carried forward to future years, and that crypto-to-crypto exchanges or donations should not be treated as disposals, given standard international practice. In addition, CIPAC says the bill must clarify how cryptocurrencies obtained through mining will be taxed.

Beyond these points, the association opposes the introduction of hidden-dividend rules and rejects the planned increase in corporate tax from 12.5 to 15 per cent.

It even invites the government to explain publicly why the rate needs to rise. If the increase goes ahead, however, CIPAC sets out a series of measures it believes are essential to maintain Cyprus’ competitiveness.

These include raising the notional interest deduction from 80 to 85 per cent, allowing unused deductions to be carried forward indefinitely, pooling foreign-tax credits, and ensuring that foreign-tax relief is applied before group losses.

It also proposes easing group-relief rules and keeping access to losses even when companies move between groups.

In its comments on the special defence contribution law, CIPAC expresses further reservations, especially around domicile-related provisions and a series of new anti-abuse rules.

It strongly objects to expanding the tax commissioner’s discretionary powers, noting that an independent expert appointed by the Finance Ministry last year recommended reducing discretion in order to ensure consistent tax treatment.
The institute also opposes the proposed 10 per cent tax on disguised dividends for shareholders who are both resident and domiciled in Cyprus.

If the measure is retained, the institute argues that the same act must not be taxed elsewhere, and that implementation should be deferred for two years to allow taxpayers and professionals time to adapt.

On the capital gains tax law, CIPAC disagrees with lowering the threshold used to determine whether a company is considered ‘property-rich’, a change that would result in more share disposals being taxed.

It also objects to granting the tax commissioner the power to withhold tax-clearance certificates for property transfers if either the buyer or seller is not considered fully compliant with their tax obligations.

It warns that the term ‘fully compliant’ is unclear and risks inconsistent application.

Should the provision be adopted, CIPAC says compliance must be clearly defined, the rule should apply uniformly to all property transactions, and any implementation should be postponed to January 1, 2027 to give taxpayers time to settle any outstanding issues.

Finally, the institute repeats its longstanding position that the stamp duty law should be abolished altogether.

Given that it generates only around €35 million out of roughly €7 billion in total tax revenues, the institute argues that the administrative burden it imposes on both the tax department and taxpayers outweighs its fiscal value.