Cyprus Tax Reform 2026: What Changed From 1 January and Why It Matters

Cyprus has officially implemented a major Tax Reform effective from 1 January 2026. The reform was approved by Parliament on 22 December 2025 and the relevant laws were published in the Government Gazette on 31 December 2025. The objective is clear: align Cyprus with international standards while maintaining a competitive and business-friendly environment for international companies, investors, founders, and high-skilled professionals.

The changes affect both companies and individual taxpayers, including corporate taxation, dividend rules, crypto taxation, employment-related benefits, and the day-to-day compliance landscape.

This article summarises the most important confirmed changes in a clear, practical way – so you can understand what matters now and what you should review for 2026 onwards.

Cyprus Tax Reform 2026: Corporate Tax increases to 15% (from 12.5%)

From 1 January 2026, the standard Cyprus Corporate Income Tax (CIT) rate is 15%.

For most businesses, the impact is direct: taxable profits are now taxed at 15% instead of 12.5%.

At the same time, the reform keeps Cyprus aligned with international developments and reinforces the country’s long-term positioning as a stable EU jurisdiction for international structures. Cyprus remains attractive due to its business infrastructure, EU access, and established international tax planning ecosystem (subject to substance and compliance requirements).

Loss carry-forward extended to 7 years

Tax loss carry-forward is extended from 5 to 7 years, giving businesses more flexibility to recover losses over longer investment cycles.

This is especially relevant for:

• startups and scale-ups,
• R&D and technology companies,
• groups with multi-year expansion plans,
• businesses with volatile or seasonal profitability.

 

Cyprus IP Box: effective rate becomes ~3% after the CIT increase

The Cyprus IP Box regime remains one of the strongest tools in Europe for IP-driven businesses, especially software and technology companies.

Because the corporate tax rate rises to 15%, the commonly referenced headline effective IP Box rate becomes:

• qualifying IP profits taxed on 20% of the amount (due to 80% exemption)
• at 15% corporate tax
  Effective rate: ~3% (15% × 20%)

 

This is a simple way to understand the new baseline – the real outcome still depends on the nexus fraction and qualifying conditions.

Extra clarity introduced for IP capital allowances

The reform also clarifies how capital allowances should be calculated when intangible assets are acquired in exchange for issuing shares. In such cases, allowances cannot exceed the fair market value of the asset at acquisition.

Dividends: SDC rate reduced to 5% – but transitional rules matter

The reform reduces the Special Defence Contribution (SDC) on dividends received by individuals from 17% to 5%.

Transitional rule: dividends from older profits may still be taxed at 17%

This is important: dividends paid by Cyprus tax resident companies out of profits earned up to 31 December 2025 can remain subject to 17% SDC if received on or before 31 December 2031 (for Cyprus tax resident individuals who are subject to SDC).

In other words:

• New profits (2026 onward) follow the new environment,
• but older retained earnings may carry the historical tax treatment for a limited period.

 

What to do: If your company has significant retained profits from 2024–2025, dividend planning should be reviewed carefully before distributions are made.

Cyprus Tax Reform 2026: Deemed Dividend Distribution (DDD) abolished from 2026 profits

Cyprus abolishes the Deemed Dividend Distribution (DDD) rules for profits earned from 1 January 2026 onwards.

This is a meaningful improvement for businesses that retain profits for reinvestment or long-term growth.

Transitional DDD rules for 2024–2025 profits

While DDD is removed going forward, the reform introduces transitional rules for profits earned in 2024 and 2025, where 70% of profit can be deemed distributed two years after the end of the relevant year:

• 2024 profits → relevant date 31 December 2026
• 2025 profits → relevant date 31 December 2027

 

These transitional mechanics mainly apply where profits are attributable (directly or indirectly) to Cyprus tax resident and domiciled shareholders.

Rental income: SDC abolished (now only subject to income tax)

Rental income is no longer subject to SDC. Instead, it remains subject to income tax (for individuals) or corporate income tax (for companies).

Compliance note: electronic rental payments

To increase transparency, the reform introduces an obligation for rent payments relating to immovable property in Cyprus to be made electronically, via bank transfer, card, or other recognised electronic payment methods.

For landlords and tenants, this is a practical compliance requirement that should be implemented from 2026 onward.

Cyprus Tax Reform 2026: Stamp Duty fully abolished from 1 January 2026 – what it means for businesses

The reform confirms that Stamp Duty is fully abolished from 1 January 2026.

What this means in practice:

• Documents executed from 1 January 2026 are generally not subject to stamp duty.
• Documents signed (even by one party) up to 31 December 2025 can remain within the previous stamp duty framework and may require stamping under transitional rules.

 

For most businesses, however, the direction is clearly positive: fewer transaction frictions and lower administrative cost on documentation.

Crypto taxation 2026 in Cyprus: flat 8% – with clear scope and limits

The reform introduces a special mode of taxation for crypto assets (as defined by EU rules), taxing gains at a flat 8%.

Taxable gains include those arising from:

• sale of a crypto asset,
• gifting crypto,
• exchanging one crypto asset for another,
• using crypto as payment.

 

Important exclusions and limitations

• The 8% regime does not apply to gains on crypto acquired through mining.
• Losses on crypto can generally be offset only against crypto gains of the same year, and cannot be carried forward or used under group relief.

 

This gives clearer tax treatment for individuals and businesses active in digital assets, but also introduces specific compliance mechanics that should not be ignored.

Personal Income Tax 2026 in Cyprus: higher threshold and revised brackets

The personal income tax threshold increases to €22,000, and new bands apply from 2026.

New personal income tax bands (from 2026)

• €0 – €22,000: 0%
• €22,001 – €32,000: 20%
• €32,001 – €42,000: 25%
• €42,001 – €72,000: 30%
• Over €72,000: 35%

 

Employment-related income: more clarity on termination and incentive payments

The reform also expands the taxation rules for certain employment-related income (including incentives granted before commencement, and ex gratia payments on termination/retirement). Amounts exceeding €200,000 may be taxed at 20% under specific conditions.

Property and Capital Gains: “property-rich” threshold reduced to 20%

For investors holding property indirectly through companies, the reform updates Capital Gains Tax (CGT) rules.

Notably, the threshold for “property-rich companies” is reduced from 50% to 20% (based on the relationship between immovable property value and the value of shares).

The reform also increases certain CGT lifetime exemption amounts (e.g., the general exemption to €30,000 and primary residence exemption to €150,000), aligning exemptions more closely with today’s market reality.

Compliance changes: stricter administration and enforcement (companies & self-employed)

Beyond tax rates, the reform significantly upgrades the compliance framework.

Key changes include:

• New filing and tax payment deadlines for legal persons and individuals obliged to prepare accounts (for 2026, deadline becomes 31 January 2028, replacing the previous 31 March timeline).
• Updated rules on record retention: documentation must generally be kept for 6 years from the relevant submission deadlines, with extensions where audits begin.
• The threshold for requiring audited financial statements for individuals rises to €120,000 annual income (from €70,000).
• Stronger enforcement powers, including the ability to suspend business operations and seal premises under serious non-compliance conditions (with formal notifications and strict criteria).
• Additional rules on director liability even after stepping down, and mechanisms for securing unpaid tax debts.

 

For many businesses, this means a stronger emphasis on:

• timely filings,
• organised records,
• clean invoicing and documentation,
• and correct tax payment processes.

 

What should businesses and individuals do next?

Because these changes apply from 1 January 2026, it makes sense to review your setup now – especially if you operate a Cyprus company, receive dividends, own property, or use equity incentives.

For Cyprus companies:

• Update forecasts using 15% CIT
• Review retained earnings and dividend strategy
• Re-check substance and corporate residence position
• Assess crypto activity and reporting approach
• Consider equity incentive plans under the new 8% regime
• Align compliance processes with stricter administration rules

 

For individuals / shareholders in Cyprus:

• Confirm how dividend SDC applies to you (domiciled vs non-dom, profit years)
• Review rental income compliance and electronic payment rules
• Recalculate personal income tax based on the new bands

 

Need help applying Cyprus Tax Reform 2026 to your case?

The reform creates opportunities – but also increases the importance of correct structuring and timing, especially for groups with holding entities, international shareholders, or IP-led activity.

If you want a clear plan for 2026 onwards, IBCCS TAX can help you:

• assess your exposure and opportunities,
• optimise profit extraction,
• implement IP Box in Cyprus and substance correctly,
• build a compliant structure for growth in Cyprus.

FAQ: Cyprus Tax Reform 2026:

1. When did Cyprus approve the Tax Reform and when did it become effective?

Cyprus Parliament approved the reform on 22 December 2025, the laws were published in the Government Gazette on 31 December 2025, and the changes apply from 1 January 2026.

2. What is the corporate tax rate in Cyprus from 2026?

The standard Corporate Income Tax (CIT) increases to 15% from 1 January 2026.

3. Can Cyprus treat a company as tax resident based on incorporation?

Yes. The tax residence rules are extended so that companies incorporated under Cyprus Companies Law may be treated as Cyprus tax resident, subject to treaty tie-breaker rules where applicable.

4. What is the new SDC rate on dividends for individuals?

The SDC rate on dividends received by individuals reduces from 17% to 5%.

5. Are there transitional rules for dividend taxation?

Yes. Dividends paid out of profits earned up to 31 December 2025 may still be taxed at 17% if received on or before 31 December 2031, depending on the taxpayer profile and conditions.

6. Is Deemed Dividend Distribution (DDD) still applicable?

DDD is abolished for profits earned from 1 January 2026 onwards.

7. Does DDD abolition apply to profits from 2024–2025?

Transitional provisions apply to 2024 and 2025 profits, where 70% of profit may be deemed distributed two years after the end of the relevant year (2024 → 31/12/2026, 2025 → 31/12/2027) under specific conditions.

8. Is rental income still subject to SDC in Cyprus?

No. Rental income is no longer subject to SDC; it remains subject to income tax / corporate income tax.

9. Do rental payments in Cyprus need to be made electronically?

Yes. Rental payments for immovable property in Cyprus must be made via bank transfer, card, or other recognised electronic methods.

10. Is stamp duty abolished in Cyprus from 2026?

Yes. Stamp Duty Law is fully abolished from 1 January 2026.

11. How are crypto gains taxed in Cyprus from 2026?

Gains from certain crypto transactions are taxed at a flat 8% rate (including sale, gift, exchange, and use as payment).

12. Does the 8% crypto tax apply to mining?

No. The special 8% regime does not apply to crypto acquired through mining.

13. Can crypto losses be carried forward?

No. Crypto losses can generally be offset only against crypto gains of the same year and cannot be carried forward or used under group relief.

14. How are employee stock options taxed from 2026?

Approved share-based schemes can benefit from a special 8% flat tax on qualifying benefits, subject to conditions (including vesting period and caps).

15. What is the cap for the 8% stock option regime?

The total benefit taxed at 8% cannot exceed €1 million over a 10-year employment period (subject to detailed rules).

16. How long can tax losses be carried forward in Cyprus from 2026?

Tax losses can be carried forward for 7 years (previously 5).

17. What is the new personal income tax-free threshold?

The tax-free threshold increases to €22,000.

18. What are the new personal income tax brackets from 2026?

• €0–€22,000: 0%
• €22,001–€32,000: 20%
• €32,001–€42,000: 25%
• €42,001–€72,000: 30%
• Over €72,000: 35%

 

19. What changed in compliance deadlines for companies and self-employed with accounts?

The filing deadline for those obliged to prepare accounts becomes 31 January of the year following the following year of assessment (e.g. for 2026: 31 January 2028).

20. How long do businesses need to keep tax records from 2026?

Records supporting returns and books generally must be kept for 6 years, with extensions in case an audit begins near the end of the retention period.

21. What changed for property-rich companies under CGT rules?

The threshold linked to “property-rich companies” is reduced from 50% to 20%, affecting CGT exposure in certain structures holding Cyprus immovable property indirectly.