Tax expert criticizes new government measures: “This is effectively a tax amnesty”

Tax expert Kemal Özçakır criticized the government regulations concerning undistributed corporate profits and tax deductions, saying the new measures raise serious questions both from a technical and legal standpoint.

Speaking on the program “Parapolitics” on Cyprus TV, Özçakır noted that the business community has long been dissatisfied with the dividend taxation system. According to him, companies first pay corporate tax, after which another 15% tax is withheld from the remaining profit. If dividends are combined with other income, the total tax burden can reach 37%.

The expert reminded viewers that, under the new government regulation, the matter may be settled provided that 7.5% of the accumulated profit shown in the company’s balance sheet as of December 31, 2025, is paid in advance.

“You give up 37%, then 15%, and agree to 7.5%. In essence, this is a tax amnesty,” Özçakır said.

He also criticized the wording used in the official gazette, stressing that the term “undeclared tax” is incorrect. In his words, income can be undeclared, but not tax revenues themselves.

In addition, Özçakır opposed equating dividends with interest income, noting that company profits can fluctuate significantly, unlike fixed interest payments.

The expert also commented on the expansion of the 5% discount for early tax payment. While previously this benefit was available only to compliant taxpayers, now even those who had previously missed payment deadlines will be able to use it, provided they make advance payment on the specified dates.

In Özçakır’s view, this decision is primarily aimed at accelerating the collection of arrears.

Separately, the expert addressed the rise in purchases by TRNC residents in the south of the island. He called estimates of budget losses amounting to 500 million euros exaggerated, but acknowledged that high prices and weak competition are pushing consumers to shop outside the TRNC.

In conclusion, Özçakır emphasized the need for structural economic reforms and warned that without a more realistic budget policy, public debt will continue to grow.