Nicosia, Cyprus. A legislative proposal submitted by Disy and Diko on transitional relief for legacy stock option schemes was discussed before the House Finance Committee this week. The bill targets incentive schemes introduced by Cypriot companies before the tax reform.
Scope of the proposal
The proposal focuses on incentive schemes implemented by Cypriot companies prior to the tax reform, during a period when conditions for inclusion in the special taxation regime had not yet been defined.
Discretionary approvals and conditions
Under the proposed framework, the Tax Commissioner would be granted discretionary authority to approve such schemes even if they do not fully meet current legislative requirements. The provision would apply on the condition that the schemes include a minimum vesting period of three years, which must expire by the second half of 2026.
Tax Commissioner’s comments
“The regulation arose following recommendations from companies, mainly in the technology sector, which already had share incentive programmes in place and found themselves outside the new framework after the tax reform,” said Tax Commissioner Sotiris Markides. “The proposal provides flexibility until the end of June to approve older schemes that did not meet the requirements set by the legislation,” he added.
Impact on the technology sector and policy aims
Markides said the technology sector is among the most affected, noting that such companies have greater flexibility to relocate operations outside Cyprus. The proposed regulation was presented as a measure to enhance competitiveness and prevent business relocation, as well as to curb the outflow of highly skilled personnel.
Constitutionality concerns and Legal Service response
“Whether the proposal addresses issues of constitutionality, as the House appears to be determining through law matters that fall within the executive branch,” questioned Akel MP Andreas Kafkalias. In response, a representative of the Legal Service of the Republic said the bill does not impose mandatory approvals but allows discretion to the Tax Commissioner.
What impact do you think the proposed transitional relief could have on companies with legacy stock option schemes?
