Executive summary

This briefing consolidates and restates the key measures of Cyprus’ tax reform taking effect as of 1 January 2026. It reflects the final provisions across personal income tax, corporate taxation, Special Defence Contribution (SDC), capital gains, stamp duties, and tax administration & compliance.

Personal income tax

• Tax-free threshold increased from €19,500 to €22,000.
• Revised progressive brackets: €22,001–€32,000 at 20%; €32,001–€42,000 at 25%; €42,001–€72,000 at 30%; income above €72,001 at 35%.
• Family allowances (per parent) where family income stays within the qualifying bands: first child €1,000; second child €1,250; third and subsequent children €1,500. Dependent children include students up to age 24.
• Housing & green deductions: up to €2,000 for interest or rent on a primary residence; up to €1,000 for energy upgrades of a primary residence or for the purchase of a new electric vehicle.
• Insurance premium relief extended to cover permanent or partial incapacity in addition to life insurance.
• Ex gratia lump-sum payments by employers (at commencement or termination): 20% flat tax after a €200,000 tax-free amount where paid due to termination of employment.
• Special pension regime for services rendered abroad: amounts exceeding €5,000 (previously €3,420) taxed at 5%.

Corporate & business taxation

• Corporate income tax rate increased from 12.5% to 15%.
• Loss carry-forward period extended from 5 to 7 years.
• 120% super-deduction for research & development expenditure on intangible assets extended until 2030.
• Deductible entertainment expenses cap increased from €17,086 to €30,000 per year.
• 8% flat taxation for profits from the disposal of crypto-assets; losses from disposal may be offset against profits within the same year.
• 8% special taxation of stock-option gains under approved employer share schemes (up to twice the employee’s remuneration), with an overall cap of €1 million over a 10-year period.
• Enhanced capital allowances: additional 20% for machinery and installations used in agricultural or livestock production, after deducting any subsidies.

Special Defence Contribution (SDC)

• Deemed dividend distribution on profits earned after 1 January 2026 abolished.
• SDC on actual dividend distributions reduced from 17% to 5% for profits generated after 1 January 2026.
• SDC imposition on rental income abolished (previously 3% on 75% of rent – effective rate 2.25%). Rental income remains subject to income tax.
• A 5% withholding tax applies to dividends paid to companies resident in jurisdictions with a low tax rate.
• Withholding tax rate on interest from other EU Member State government bonds and on deposits of the Health Insurance Fund reduced to 3%.
• Alternative regime for non-domiciled individuals after 17 years in Cyprus: elective lump-sum of €250,000 per five-year period, available for a total of five plus five years.
• Payment of SDC on foreign dividends and interest simplified (from two instalments to one), payable upon submission of the income tax return.

Capital gains tax

• Exemption for exchanges of immovable property extended to consideration in kind involving immovable property.
• Lifetime exemptions increased: general exemption from €17,086 to €30,000; agricultural land exemption from €25,629 to €50,000; primary residence exemption from €85,430 to €150,000.
• Definition of immovable property amended to tackle avoidance: disposal of shares now subject to capital gains tax where at least 20% (previously 50%) of value is derived, directly or indirectly, from immovable property in Cyprus.
• Where a company’s value is essentially represented by immovable property, disposal proceeds are determined as declared by the parties, adjusted by the market value of other assets and liabilities.
• Tax Commissioner may withhold consent to transfer immovable property where disposer or purchaser is not fully compliant with tax obligations (foreclosures excluded).

Stamp duties

The Stamp Duties Law is repealed. Most transactions no longer attract stamp duty, subject to limited statutory exceptions (e.g., certain real estate, banking and insurance documents where applicable under separate laws).

Tax administration & compliance

• Gross income threshold for mandatory audited accounts for individuals increased from €70,000 to €120,000.
• Corporate income tax returns due by 31 January of the second year following the tax year; payment due on the same date.
• Mandatory income tax return submission for all Cyprus tax resident individuals aged 25 and above, irrespective of taxable income.
• Mandatory tax return submission introduced for partnerships.
• Deadline to submit an objection to the Tax Commissioner extended to 60 days.
• Administrative penalties and monetary charges amended to enhance voluntary compliance.
• Rent payments for immovable property in Cyprus must be made via traceable methods: bank transfer, card payment, recognised electronic payment method or bank cheque.
• The Tax Commissioner may suspend business operations and seal premises where serious non-compliance persists (e.g., multiple return failures, unpaid taxes exceeding €20,000 including surcharges, invoice violations, or obstruction of tax audit). The suspension may not exceed ten days and is preceded by three notifications.

Effective date & next steps

Unless otherwise specified above, changes apply from 1 January 2026. Businesses and individuals should review payroll, dividend policies, corporate compliance calendars, and property transaction procedures to align with the new rules. Consider advance planning for family allowances, housing and energy deductions, and elective regimes where applicable.