CYPRUS TAX REFORM 2026

Below is a summary of the key tax changes, most of which are effective from 1 January 2026, unless otherwise stated.

1.Income Tax Law

Income/corporation tax

Corporate Income Tax (CIT) rate increased from 12.5% to 15%
Tax loss carry forward extended from 5 to 7 years
Additional 20% “super deduction” for qualifying R&D expenses (2025–2030)
Amortisation of intangible assets with indefinite life capped at 20 years
Entertainment expenses deductible limit increased to lower of 1% of turnover and €30,000
Restriction on interest deductibility for non-business assets continues beyond 7 years
Introduction of crypto taxation at a flat rate of 8% (both for individuals and companies and subject to conditions)
Share option schemes may be taxed at 8% flat rate (subject to conditions)

Residency & Corporate Residence

Removal of the requirement for individuals not to be tax resident elsewhere under the 60-day rule
Corporate tax residency can be established by incorporation, unless overridden by a DTT (i.e. a Cyprus tax registered company is considered Cyprus tax resident by default)

Individuals

Other

Ex-gratia payments (Retirement (including early retirement) / Termination of employment or appointment / “Golden handshake” payments / Compensation for loss of office above €200,000 taxed at 20%
From 1 January 2031, redemptions of fund units treated as dividends (instead of disposal of titles)

SDC on dividends for Cyprus-domiciled individuals reduced from 17% to 5%. (non-domiciled individuals subject only to GESY)
SDC on rental income abolished (both for companies and individuals) (rental income still subject to GESY)
Deemed Dividend Distribution rules abolished for profits earned after 1 January 2026 (DDD payments applicable until 31 January 2028 relating to profits of the year 2025)
Profits earned up to 31 December 2025 remain subject to SDC at 17% upon distribution
New deemed dividend rules introduced at 10%, covering:
- Private use of company assets by shareholders
- Transfer of assets to shareholders below market value
Non-domicile SDC exemption may be extended beyond 17 years upon payment of €250,000 per additional 5-year period
Penalties and fines significantly increased
From 1 January 2031, fund unit redemptions treated as capital reductions

Shares deriving 20% or more of their value from Cyprus immovable property fall within CGT (previously 50%)
Increased tax-exempt thresholds for disposals of immovable property, agricultural land, and main residence
Exemption extended to shares listed on regulated markets of recognised exchanges
New exemption for unlisted shares up to €50,000 per annum
Land-for-building exchanges exempt from CGT (αντιπαροχή). In this case CGT is deferred to subsequent disposal of the building/flat/shop etc)
Penalties and fines increased

Mandatory personal tax return (TD1) filing for:
- All tax residents aged 25–71, regardless of whether they have income or not
- All tax residents with income, regardless of age
New tax return & payment deadline for audited taxpayers: 31 January (13 months after year-end)
Partnerships now required to file tax returns (in addition to partners)
Objection deadline extended to 60 days
Statute of limitations remains 6 years, calculated from return submission date (as opposed from the end of the tax year)
Audit threshold for individuals increased from €70,000 to €120,000
Commissioner may suspend business operations for serious non-compliance
From 1 July 2026, rent payments exceeding €500 must be made electronically (no cash)
Directors remain liable for actions during their tenure even after resignation
Increased penalties and fines across the board
Commissioner of Taxation empowered to pledge shares where tax arrears exceed €100,000

Stamp Duty is abolished
Stamp duties for obtaining tax residence / tax clearance certificates still apply