Extra tax on Cypriot bank profits As the year draws to a close, Cyprus is once again entering turbulent political territory. AKEL has revived its proposal for an extraordinary tax on bank profits, insisting that credit institutions must contribute more to the fiscal burden created by soaring inflation and rising interest rates over the past three years. The new bill covers the tax years 2025 and 2026 and introduces a solidarity levy on the portion of net interest income that has increased by more than 40% compared with 2022, taxed at a rate of 20%.
This measure—much like last year—targets Bank of Cyprus first and foremost, as the country’s largest lender and the main focus of political pressure over bank profitability. However, the implications now extend beyond a single institution. Should the proposal pass, Eurobank and Alpha Bank would also be directly affected due to their recent expansion in Cyprus through the acquisitions of Hellenic Bank and Astrobank. Although not the core targets of political scrutiny, any additional tax burden would feed into their consolidated financial results, reshaping their strategic plans in the local market.
What elevates the stakes this time is not just the substance of the tax but the political arithmetic. The same proposal was rejected last year by the narrowest of margins — 25 votes in favour, 25 against, and four abstentions. Even a minor shift in today’s balance could swing the outcome.
The environment is also significantly different for Eurobank and Alpha Bank. Their increased exposure to the Cypriot market means Cypriot taxation is no longer a peripheral consideration but a material component of group-level performance. With both banks still in the process of integrating and restructuring their new subsidiaries, an unexpected tax shock limits their investment capacity, hampers digital transformation plans, and injects uncertainty into long-term capital allocation.
AKEL argues that banks’ recent profit surge stems not from organic growth but from the windfall effects of ECB rate hikes. The party points to a European Commission report showing that similar windfall taxes in Baltic countries did not harm financial stability. Banks, however, counter that they already pay a 0.15% levy on deposits—over €500 million contributed in the last decade—and warn that further taxation could disrupt credit supply and destabilize the operating framework of a small, open economy.
As the bill heads back to Parliament, the outcome is anything but certain. A single vote could again decide whether Cyprus imposes an extraordinary levy on its banking system. If approved, Bank of Cyprus will bear the immediate burden—yet the ripple effects on Eurobank and Alpha Bank may prove equally consequential. If rejected, few doubt the debate will return, fueled by persistent social pressure and ongoing scrutiny of bank profitability.
