On 28 September 2026, the Ministry of Finance published a detailed press release outlining a comprehensive package of measures taken by the Government to address the impact of geopolitical developments on the Cypriot economy. The announcement comes against the backdrop of sustained regional instability, energy supply disruptions, and inflationary pressures affecting key sectors such as tourism, shipping, and agriculture. The package combines fiscal, monetary, and structural interventions, with tax policy playing a pivotal role in providing immediate liquidity support to businesses and households while preserving long-term fiscal discipline. The measures were coordinated with the European Commission under the Temporary Crisis and Transition Framework (TCTF) to ensure compatibility with State aid rules.
Key Takeaways
- Energy Tax Credits for Energy-Intensive Industries: A refundable tax credit of up to 30% of eligible energy costs incurred between January and December 2026 is introduced for companies in sectors identified as energy-intensive under the EU ETS. The credit is capped at €2 million per undertaking and requires beneficiaries to maintain employment levels and commit to energy audits. The scheme is estimated to benefit 120 firms and cost €85 million, financed through the Recovery and Resilience Facility.
- SME Liquidity Support via Tax Deferrals: Small and medium enterprises with turnover below €10 million may defer 50% of their corporate income tax prepayments for the third and fourth quarters of 2026 until March 2027, interest-free. Additionally, VAT payments for October–December 2026 can be settled in three equal monthly instalments starting January 2027. The deferral scheme targets 15,000 SMEs and aims to preserve cash flow without eroding the tax base.
- Targeted Household Relief Through Property Tax Adjustments: The government announced a one-off 50% reduction in the 2026 immovable property tax for primary residences with objective value below €350,000, benefiting approximately 200,000 homeowners. Concurrently, the special contribution on defence (currently 1.7% on gross salaries) will be suspended for employees earning below €2,500 monthly for the remainder of 2026, providing immediate relief to low-income workers. These measures are budgeted at €60 million and offset by a temporary increase in the dividend withholding tax rate from 17% to 20% for non-resident shareholders.
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