Cyprus Tax Reform News

On the 22/12/2025 the Cyprus parliament voted a major package of Tax Laws aiming to maintain the competitiveness of Cyprus as an international business hub.

As from the 01^st of January 2026 the following important amendments will be applicable:

Corporate

• Corporation tax has increased from 12.5% to 15% aligning with OECD global minimum tax rules for multinationals
• Special defense tax (SDC) on dividends has decreased from 17% to 5%

• SDC on rental income is abolished.
• SDC on Deemed dividend distributions on profits earned after 2026 has been abolished
• Stamp duties tax is abolished except for real estate, banking and insurance contracts.
• A flat 8% tax applies to cryptocurrency gains and approved stock options.
• Loss carry-forward extended from 5 to 7 years.
• R&D super-deduction (120%) extended to 2030
• Entertainment expenses deduction cap increasedto€30,000(from€17,086).

Personal

• Income tax, tax free threshold has increased from Eur19.500 to 22.500

New personal income tax brackets:

• 20%on€22,501–€32,000
• 25%on€32,001–€42,000
• 30%on€42,001–€72,000
• 35%on€72,001+

Personal income tax reliefs introduced

A. Child/student deductions (up to age 24) + income caps
Per child/student deduction (up to age 24):

• €1,000for the1st
• €1,250for the2nd
• €1,500for the3rd and each additional

Eligibility via household income ceilings(as reported):

• ≤€100,000for1–2 children
• ≤€150,000for3–4 children
• ≤€200,000for5+ children

1. Housing, rent, "green", and resilience deductions
   Reported new deductions/allowances include:

• Up to €2,000deductions forloan interest and rent.
• €1,000forgreen home investments, explicitly includingelectric vehicle purchases
• Up to €500forhome insurance against natural disasters.
  1. Severance payments: 20% tax, with a €200,000 tax-free allowance when paid due to employment terminationD. Capital gains tax free thresholds increased

Anti-evasion and compliance powers (administration & enforcement)

A. Mandatory filings / reporting scope

• All individuals aged 25+ must file tax returns.

1. Electronic payments for rent

• Rent payments exceeding €500 must be processed electronically(reported effective1 July 2026).

1. Expanded investigatory/enforcement powersReported new powers include:

• Tax Commissioner may requestsix-year asset/liability statements.
• Ability to demandbanking records from Cyprus-based banks.
• Authority toseal businessesfor non-compliance (non-filing, not issuing receipts, not settling debts), with a right to challenge in court.
• Share freezefortax debts exceeding €100,000.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.