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

  1. Increase of Corporate Tax to 15% from 12.5%.
  2. 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%
  3. Cancellation of Deemed Dividend Tax (DDT)
  4. Reduction of dividend Tax SDC to 5% from 17% for Cyprus Residents
  5. The introduction of a flat 8% Tax on cryptocurrency
  6. Losses carried forward allowable period is extended from 5 to 7 years.
  7. Extending the 120% super-deduction for qualifying R&D expenditure until 2030.
  8. Increasing the maximum deductible limit for entertainment expenses to €30,000.
  9. Revision of the Capital gains Tax regime (CGT), covering property swaps which are now Tax free.
  10. 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
  11. Rent payments exceeding €500 must be electronic from 01/07/2026.
  12. New powers vested to Income Tax Commissioner with regards to collection of Taxes
  13. 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.

Key changes for Individuals – Applicable from 01/01/2026

  1. 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%
  2. Mandatory Tax Returns: All individuals aged 25 and over are required to submit an annual Tax return, regardless of income, to improve compliance.
  3. 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
  4. Deduction up to €2,000 per year for rent or mortgage interest on the primary residence.
  5. SDC on rental income is ABOLISHED.
  6. Deductions for green energy:
    • Energy upgrades / photovoltaic / EV purchase: up to €1,000 deduction
    • Home insurance against natural disasters: up to €500 per person