The House Finance Committee concluded its discussion on the government’s tax reform package on Thursday and finalised which party proposals will proceed to the plenary on Monday. Of the eleven proposals tabled by political groups, only two from AKEL and one from the Green Party will move forward alongside the government bills.
The AKEL proposals concern a new tax on high-value real estate and a tiered corporate levy. The Greens’ proposal concerns a capital gains tax exemption for sales of primary residences linked to non-performing loans that became NPLs by 2022.
AKEL’s real estate tax proposal
AKEL MP Aristos Damianou presented the party’s first proposal, which introduces an annual property tax of 0.1 percent on real estate holdings exceeding three million euro. He said the measure aligns with recommendations by the Economics Research Centre and noted that similar taxes exist elsewhere in Europe. The revenue, he argued, could support social policy.
The Finance Ministry reiterated its reservations. Senior official Nagia Symeonidou said the reintroduction of a national property tax requires a standalone policy review. She added that the previous form of this tax was abolished in 2017 and that reinstating it requires safeguards to avoid double taxation, given that local authorities already levy property-related charges.
Real estate sector representatives opposed the proposal. The head of the Cyprus Property Owners Association, Giorgos Mouskides, said the measure unfairly targets one asset class. The Legal Service also raised constitutional concerns and asked for clarity on whether the tax applies cumulatively across all properties and whether primary residences would be exempt.
AKEL’s corporate levy proposal
AKEL’s second proposal introduces a tiered annual fee for companies holding significant assets. Firms with assets between one and two million euro would pay three hundred and fifty euro, rising to one thousand two hundred and fifty euro in higher bands.
The Finance Ministry said Cyprus should avoid reintroducing non-reciprocal fees, noting that a similar levy was recently abolished. It argued that companies are already facing a higher tax burden through the planned 2.5 percent increase in corporate tax.
VAT proposals deferred
Parties submitted four proposals to introduce reduced VAT rates on a range of goods and services, including photovoltaic systems, energy upgrades for homes, electricity and basic goods. After discussion, the committee decided to withdraw all four from Monday’s agenda. The proposals will return in January, after the ministry submits a fiscal impact assessment.
Capital gains tax relief for NPL-related sales
Green Party MP Stavros Papadouris and ELAM MP Sotiris Ioannou tabled proposals to exempt capital gains tax on property sales arising from NPL restructuring agreements. Papadouris wants relief extended to loans that became non-performing by 2022 and limited to primary residences.
The Finance Ministry continues to oppose broad extensions of the measure, warning that it creates expectations of repeated waivers. It noted that gains on the sale of primary residences are already exempt up to one hundred and fifty thousand euro, which partially addresses the issue.
The Competition Protection Office said any such relief constitutes state aid and must be notified to the European Commission.
A narrower version of the proposal will be submitted as an amendment to Monday’s plenary.
Mortgage interest deduction proposal
Independent MP Alexandra Attalidou proposed allowing a full tax deduction for interest paid on primary-residence mortgages up to 475,000 euro. She cited the rising cost of housing and the sharp impact of higher interest rates.
The Finance Ministry rejected the proposal, arguing that mortgage-related relief has already been fully addressed within the tax reform package.
Source: CNA