Cyprus’ new tax framework has come into force as of 1 January 2026, introducing important changes for businesses, shareholders, and individuals.
The reform aims to modernise the tax system, align with international standards, and maintain Cyprus’ position as a competitive EU jurisdiction.
Below is an overview of the changes that matter most—and how they may affect you.
Corporate & Business Taxation
- Corporate Income Tax increased to 15% (from 12.5%), aligning Cyprus with OECD Pillar Two requirements.
- Loss carry-forward extended to 7 years, improving flexibility for growing and restructuring businesses.
- Research & Development Expenses super-deduction of 120% extended until 2030, supporting innovation-driven and IP-based structures.
- Higher entertainment expense deduction cap (up to €30,000 annually).
- Flat 8% tax introduced on:
- Gains from crypto-asset disposals
- Share-based remuneration under approved employee stock schemes
Shareholders, Dividends & Investment Income
- SDC on actual dividend distributions reduced to 5%
- Deemed dividend distribution abolished
- SDC on rental income abolished
Practical impact:
Companies may now retain profits without forced tax leakage, improving cash-flow management and long-term planning. Shareholders are taxed only upon actual distributions and at a significantly reduced rate.
Personal Taxation & Deductions
- Tax-free income threshold increased to €22,000
- New progressive income tax bands:
- €22,001–€32,000: 20%
- €32,001–€42,000: 25%
- €42,001–€72,000: 30%
- Above €72,001: 35%
- Expanded deductions include:
- Child-related allowances (income-tested and scaled by number of dependants)
- Mortgage interest or rent (up to €2,000)
- Green investments
- Home insurance for natural disasters
- Mandatory tax return filing now applies to all Cyprus tax residents over 25, regardless of taxable income.
Stamp Duty & Compliance Enhancements
- Stamp duty abolished for most transactions, with limited exceptions (e.g. real estate, banking, insurance).
- Enhanced tax administration measures, including:
- Traceable payment requirements
- Expanded enforcement powers for the Tax Commissioner
- Share transfer restrictions where tax liabilities exist
- Extended liability for company directors, covering their full term of office, even after resignation
Strategic Outlook
The 2026 tax reform reflects a clear shift toward greater transparency, enhanced compliance, and closer alignment with international tax standards, while placing increased emphasis on substance-driven tax planning.
Cyprus continues to be an attractive jurisdiction for businesses, investors, and individuals; however, the new framework makes proactive structuring, careful planning, and ongoing tax oversight more important than ever.
How We Support Our Clients
- Corporate structuring
- Tax planning
- Personal tax optimisation and residency matters
- Ongoing compliance and governance
If you would like to assess how the Cyprus tax reform impacts your business or personal tax position, our team is available to provide tailored guidance.
