Cyprus Tax Reform 2026: Key Changes You Need to Know
A significant reform of the Cyprus tax system came into effect on 1 January 2026, following the approval of the Tax Reform Package by the Cyprus Parliament in December 2025.
The reform introduces important changes affecting companies, individuals, shareholders and property owners, while aiming to modernise the Cyprus tax framework and strengthen the country's competitiveness.
Here are some of the key changes introduced from 2026.
Corporate Tax Rate Increased to 15%
The Corporate Income Tax rate has increased from 12.5% to 15%.
At the same time, the period during which companies can carry forward tax losses has been extended from five to seven years, providing businesses with additional flexibility in utilising tax losses.
New Personal Income Tax Bands
The tax-free threshold for individuals has increased to €22,000, while the personal income tax bands have been revised as follows:
€0 – €22,000: 0%
€22,001 – €32,000: 20%
€32,001 – €42,000: 25%
€42,001 – €72,000: 30%
Over €72,000: 35%
The reform also introduces additional tax deductions for qualifying taxpayers in areas including children and students, housing and green-transition expenditure, subject to the applicable conditions.
Dividend SDC Reduced to 5%
One of the most important changes for shareholders is the reduction of Special Defence Contribution (SDC) on dividends from 17% to 5% for Cyprus tax-resident and domiciled individuals.
However, transitional rules apply. Dividends distributed by Cyprus tax-resident companies from profits earned up to 31 December 2025 may continue to be subject to the previous 17% rate where distributed on or before 31 December 2031.
Deemed Dividend Distribution Abolished for New Profits
The Deemed Dividend Distribution (DDD) provisions have been abolished for profits earned from 1 January 2026 onwards.
Transitional rules continue to apply to profits generated before 2026, including specific provisions for profits of 2024 and 2025. This represents a significant change for Cyprus companies when considering the retention and distribution of future profits.
SDC on Rental Income Abolished
Rental income is no longer subject to Special Defence Contribution from 2026.
Rental income remains subject to Income Tax or Corporate Income Tax, as applicable, but the previous additional SDC charge has been removed.
New Tax Treatment for Crypto-Assets
The reform introduces a specific taxation regime for certain gains arising from crypto-assets.
Qualifying gains from transactions such as the sale, exchange or use of crypto-assets are generally subject to a flat income tax rate of 8%. Specific rules apply to crypto losses and certain activities such as mining.
Transfer Pricing Thresholds Increased
The thresholds for the preparation of a Cyprus Transfer Pricing Local File have increased to:
€5 million for transactions involving goods;
€10 million for financing transactions; and
€2.5 million for other categories of controlled transactions.
Businesses should nevertheless continue to ensure that transactions with related parties comply with the arm's-length principle.
Capital Gains Tax Changes
The reform also introduces changes to Capital Gains Tax.
Among other amendments, the threshold used in determining certain property-rich companies has been reduced from 50% to 20%.
The lifetime Capital Gains Tax exemptions available to individuals have also increased, including the general exemption to €30,000, the exemption for the disposal of agricultural land to €50,000, and the qualifying primary residence exemption to €150,000, subject to the relevant conditions.
Stamp Duty Abolished
The Cyprus Stamp Duty Law has been fully abolished from 1 January 2026.
This removes an administrative and tax requirement that previously applied to a wide range of agreements and commercial transactions.
Looking Ahead
The Cyprus Tax Reform 2026 represents an important change to the tax landscape for both businesses and individuals.
Companies should assess the impact of the 15% corporate tax rate, dividend distributions and revised compliance requirements, while individuals should consider how the new income tax bands, deductions and changes to dividend and rental taxation affect their personal tax position.
At F&A Grand Auditing and Consulting Ltd, we can assist businesses and individuals in understanding the impact of the new tax rules and ensuring that their tax affairs remain compliant and appropriately structured.
This article is provided for general information purposes only and should not be considered as tax, legal or professional advice. The application of the legislation depends on the individual facts and circumstances of each taxpayer.