On 24 September 2026, Finance Minister Makis Keravnos submitted the approved 2027 State Budget and the 2027-2029 Medium-Term Fiscal Framework to the House of Representatives for legislative ratification. The submission marks the formal commencement of the parliamentary budget cycle, with debates scheduled throughout October and a final vote expected by 31 December 2026. In his address, the Minister highlighted that the budget is designed to sustain macroeconomic stability, enhance competitiveness, and accelerate the green and digital transitions. Key tax legislative proposals accompanying the budget include: a bill to amend the Income Tax Law to implement the OECD Pillar Two Global Minimum Tax (GMT) for multinational enterprise groups with annual revenues exceeding €750 million, effective from fiscal years starting on or after 1 January 2027; amendments to the VAT Law to introduce a reduced 5% rate for energy-saving materials and services in residential renovations, supporting the EU Renovation Wave; and a legislative package to modernize tax administration, mandating real-time e-invoicing for B2B and B2G transactions from 1 July 2027, aligned with the EU ViDA initiative. The Minister also confirmed that the budget incorporates contingency reserves of €200 million to address potential fiscal risks from geopolitical tensions and migration flows. The House Finance Committee will commence detailed scrutiny on 5 October 2026.
Key Takeaways
- Pillar Two Implementation Timeline: Cyprus commits to transposing the EU Minimum Tax Directive (2022/2523) into national law by year-end 2026, ensuring the Qualified Domestic Minimum Top-up Tax (QDMTT) and Income Inclusion Rule (IIR) apply from 1 January 2027.
- VAT Rate Reduction for Energy Efficiency: The proposed 5% VAT rate on qualifying renovation services aims to stimulate private investment in building energy performance, directly supporting the national Recovery and Resilience Plan milestones.
- Mandatory E-Invoicing Roadmap: The 1 July 2027 deadline for real-time e-invoicing aligns with the EU VAT in the Digital Age (ViDA) proposal, requiring businesses to upgrade ERP systems and ensure interoperability with the national platform.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement