- Increase of Corporate Tax to 15% from 12.5%.
- IP BOX effective Tax rate as a result increases from 5% to 3% as below:
- Qualifying IP income → 80% exemption
- Taxable portion = 20% of qualifying profit
- Corporate rate in 2026 = 15%
- Effective IP tax = 15% × 20% ≈ 3%
- Cancellation of Deemed Dividend Tax (DDT)
- Reduction of dividend Tax SDC to 5% from 17% for Cyprus Residents
- The introduction of a flat 8% Tax on cryptocurrency
- Losses carried forward allowable period is extended from 5 to 7 years.
- Extending the 120% super-deduction for qualifying R&D expenditure until 2030.
- Increasing the maximum deductible limit for entertainment expenses to €30,000.
- Revision of the Capital gains Tax regime (CGT), covering property swaps which are now Tax free.
- Introduction of Withholding Tax equal to 17% on dividend, interest and royalties derived from the following jurisdictions:
- Black Listed Jurisdictions (BLJ’s) are those included in the EU list of non-cooperative jurisdictions (Annex I) at the time of the transaction and in the previous calendar year.
- Low Tax Jurisdictions (LTJ’s) are those with a corporate Tax rate that is lower than 50% of Cyprus’s corporate Tax rate
- Rent payments exceeding €500 must be electronic from 01/07/2026.
- New powers vested to Income Tax Commissioner with regards to collection of Taxes
- Authorities can request asset and liability statements for six years and access banking Stricter penalties apply for non-compliance, including the ability to temporarily seal a business or freeze company shares for significant tax debts after warnings.
Cyprus Tax Reform 2026
Cyprus has entered a new Tax era with a major Tax Reform after 23 years with amendments in both Corporate and Personal Tax legislation. The Government has taken significant steps towards a fairer, more transparent and compliant Tax System with immediate and direct benefits.
Key changes for Companies – Applicable from 01/01/2026
Key changes for Individuals – Applicable from 01/01/2026
- Tax free income: €22,000
New Tax Bands:
- Up to €22,000: 0%
- €22,001 – €32,000: 20%
- €32,001 – €42,000: 25%
- €42,001 – €72,000: 30%
- €72,001+: 35%
- Mandatory Tax Returns: All individuals aged 25 and over are required to submit an annual Tax return, regardless of income, to improve compliance.
- Family deductions:
- €1,000 for the first child/student
- €1,250 for the second child
- €1,500 for the third child and each additional dependent
- €2,000 per child for single-parent families
- Deduction up to €2,000 per year for rent or mortgage interest on the primary residence.
- SDC on rental income is ABOLISHED.
- Deductions for green energy:
- Energy upgrades / photovoltaic / EV purchase: up to €1,000 deduction
- Home insurance against natural disasters: up to €500 per person