The requirement to submit an Annual and Monthly Employer’s Declarations for Withheld Taxes and Contributions (for all months of the year), applies only to employers who withhold and pay Income Tax (PAYE), or/and General Healthcare System Contribution (GHS), or/and are required to pay Employer Contributions to GHS on a monthly basis to the Tax Department.

It is clarified that to be able to proceed with the payment of withheld taxes and contributions to the Tax Department, employers must first proceed with the submission the respective monthly TD7, based on which the liabilities will be created in the Tax For All system (TFA). It is recommended that the monthly TD7s also include the individuals for whom no withholdings are made; otherwise, the details of these individuals (including their annual income) should be included, in the final monthly declaration of December.

Employers with personnel and/or officers (Directors/Secretaries) with remuneration that does not have withheld taxes and/or contributions payable to the Tax Department (or/and Employer Contributions payable to GHS) are required to submit an Annual Declaration and at least one (1) Monthly Employer’s Declaration for withheld Taxes and Contributions.

• Companies Without Employees or with Employees Without Remuneration

Companies without any employees are not required to submit any TD7s. Also, the Tax Department have also clarified via FAQ (

TAX DEPARTMENT – FAQ), that for tax year 2025, companies that only have employees without remuneration, are not required to submit any TD7 forms.

Taxpayers who have received notifications regarding the above matter and do not have an obligation to submit these Declarations, either because they have no employees or their employees receive no remuneration, are advised to disregard such notifications.

• New Submission Deadlines

The relevant deadlines to submit the TD7s and pay the corresponding taxes and contributions are as follows:

• Monthly TD7s for July 2025 – December 2025: Due by 31 March 2026
• Annual TD7 for 2024: Due 31 March 2026
• Annual TD7 for 2025: Due by 31 May 2026

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

• Tax-free income band increased from €19,500 to €22,000
• New income tax deductions (subject to income thresholds) for:
  • Dependent children / university students
  • Interest or rent for main residence
  • Insurance against natural disasters
  • Energy efficiency expenses
  • Acquisition of electric vehicles

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)

2.Special Contribution for the Defence (SDC)

• 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

3.Capital Gains Tax (CGT)

• 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

4.Assessment & Collection of Taxes Law

• 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

5.Stamp Duty Law

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

When are companies related?

(1) If the same person has, directly or indirectly, at least 25% of the voting rights or of the share capital or is entitled to at least 25% share of the income of both companies

(2) lf the same person and persons connected with that person holds, directly or indirectly, at least 25% of the voting rights or of the share capital or are entitled to at least 25% share of the income of both companies.

(3) If a group of two or more persons holds, directly or indirectly, at least 25% of the voting rights or of the share capital or are entitled to at least 25% share of the income of each company and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either groups replaced by a person with whom that person is connected.

When is a company connected/related with a person?

(1) A company is connected with another person if this person holds, directly or indirectly, at least 25% of the voting rights or of the share capital or is entitled to at least 25% share of the company’s income or if that person and persons connected with him together holds, directly or indirectly, at least 25% of the voting rights or of the share capital or are entitled to at least 25% share of the company’s income.

(2) Any two or more people acting together to secure, directly or indirectly, at least 25% of the voting rights or of the share capital or are entitled to at least 25% share of the company’s income shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure directly or indirectly at least 25% of the voting rights or of the share capital or is entitled to at least 25% share of the company’s income.

What should a taxpayer do if it has transactions between connected/related persons?

In accordance with the new provisions of the Income Tax Law, connected persons which are tax residents in Cyprus, or permanent establishments in Cyprus of non-tax resident persons (Liable Taxpayers) have the obligation to prepare:

(1)  a ΤΡ documentation file and

(2) a Summary of Information Table (SIT) for transactions falling within the ambit of Section 33 of the Income Tax Law (e.g., intercompany transactions).

What is a TP documentation file?

The TP documentation file consists of:

• The Master File
• The Cypriot (local) file

MASTER FILE

What is the Master File?

The master file contains standardized information relevant for all group members of a multinational enterprise (ΜΝΕ). More specifically, the Master File should provide an overview of the ΜΝΕ group business, including the nature of its global business operations, its overall transfer pricing policies, and its global allocation of income and economic activity in order to assist tax administrations in evaluating the presence of significant transfer pricing risk. In general, the master file is intended to provide a high-level overview in order to place the ΜΝΕ group’s transfer pricing practices in their global economic, legal, financial and tax context.

Who is obliged to prepare the Master File?

The master file obligation is applicable for Liable Taxpayers when they act as the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) for Country-by-Country Reporting purposes, as defined in the Administrative Cooperation in the field of Taxation Law.

More specifically, a master file obligation will arise for Liable Taxpayers if both of the below

conditions are met:

(1) The taxpayer is part of an ΜΝΕ Group with a Country-by-Country Reporting obligation (e.g., with consolidated revenue above €750 million) AND

(2) The taxpayer is either the Ultimate Parent Entity (UPE) or the Surrogate Parent Entity (SPE).

When is the deadline for preparation and submission of the Master File?

The master file must be prepared together with the income tax return for the respective tax year ( e.g. 15 months after calendar year-end).

The master file must be made available by the liable Taxpayer at any time after the preparation deadline and submitted to the Tax Department upon request within 60 days.

When should the Master File be updated?

The master file is to be updated annually, and specific reference made to any significant changes of the market conditions that may impact the information and data included in the master file.

Cypriot File (Local File)

What is the Local File?

The local file refers specifically to material transactions of the local taxpayer. In contrast to the master file, which provides a high-level overview as described above, the local file provides more detailed information relating to specific intercompany transactions and helps to meet the objective of assuring that the taxpayer has complied with the arm’s-length principle for its material transfer pricing positions.

The local file focuses on information relevant to the transfer pricing analysis related to transactions taking place between connected parties (as defined in Section 33 of the Income Tax Law). Such information would include relevant financial information regarding those specific transactions, a comparability analysis, and the selection and application of the most appropriate transfer pricing method.

Who is obliged to prepare the Cypriot (Local) File?

The obligation to prepare the local file is applicable for Liable Taxpayers if their transactions with connected persons either exceed (or should have exceeded based on the arm’s-length principle) the amount of €1,000,000 in aggregate per category of transaction per tax year except financing activities for which the threshold has been increased to €5,000,000.

This means that in case a taxpayer has several transactions between connected persons but if separated per category they do not exceed €1,000,000 per year, then there is no obligation to prepare the local file.

Review of Cypriot (Local) File

The local file should be subject to Quality Assurance Review by a person who has a practicing certificate of ICPAC or any other recognized institute of certified accountants in Cyprus.

When is the deadline for preparation and submission of the Local File?

The local file must be prepared until the deadline for submission of the income tax return for the respective tax year ( e.g. 15 months after calendar year-end).

The local file is to be made available by the Liable Taxpayer at any time after the preparation deadline and submitted to the Tax Department upon request within 60 days.

When should the Local File be updated?

The local file is to be updated annually, and specific reference made to any significant changes of the market conditions that may impact the information and data included in the local file.

PENALTIES

What is the penalty for not submitting the TP documentation?

The ΤΡ documentation file is to be submitted to the Tax Department, upon request, within 60 days.

lf the ΤΡ documentation file is submitted after the 60th day, the penalties are as follows:

• If submitted between 61 and 90 days, the penalty is €5,000
• lf submitted between 91 and 120 days, the penalty is €10,000
• If not submitted or submitted after the 120th day, the penalty is €20,000

Obligation for provisional tax payment

The following persons have an obligation to pay provisional tax, based on their expected annual taxable income for tax year 2024:

• Individuals with taxable income other than salaries, pensions, dividends and interest; and
• companies with taxable income.

Persons with no taxable income, do not have an obligation to pay provisional tax.

Payment of provisional tax

The provisional tax is calculated by applying the relevant tax rates (depending on whether the taxpayer is an individual or a company) on the expected taxable income for the year, after taking into account any overseas tax credits. It is payable in two equal instalments, as follows:

The timely payment of provisional tax can be made by firstly creating the provisional tax obligation through the Tax Portal of the Tax Department (TD) and then selecting to pay the relevant tax by credit/debit car OR online banking.

Payments made after the effective deadline will carry interest (calculated on a completed months basis) plus a 5% penalty on the tax due. An additional penalty of 5% may be imposed by the Tax Department if the tax remains unpaid two months after the statutory deadline (i.e. for the 1^st instalment, the penalty will be imposed from 1 October onwards).

Any difference between the actual tax payable and the provisional tax paid for the year 2024 is payable by 1^st of August 2025.

10% additional tax in case of underestimation

In case the provisional taxable income declared is less than 75% of the final taxable income for the year, the taxpayer is required to pay an additional tax equal to 10% of the difference between the final tax due and the provisional tax paid.

Revised provisional tax calculation

Taxpayers can revise their provisional tax calculation (upwards/downwards) until 31 December 2024. In case of an upward revision, interest is payable on the difference between the revised amount payable and the amount initially declared and paid as in the 1^st instalment.

The Cyprus Tax Department has issued Frequently Asked Questions with reference to Article 33 & Article 33C of the Income Tax Law, Κ.Δ.Π. 314/2022 and Κ.Δ.Π. 273/2022 with effect as from 1st January 2022.

You can visit the FAQs by clicking the link below:

Τμήμα Φορολογίας | Συνήθεις Ερωτήσεις (mof.gov.cy)

The current EU Blacklist includes the following countries: American Samoa, Anguilla, Antigua and Baruda, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad & Tobago, Turks & Caicos, US Virgin Islands, and Vanuatu

The WHT are as follows:

Dividends

WHT at the rate of 17% applies on dividends paid by a Cyprus tax resident company to companies which are:

• resident in jurisdictions included in the EU Backlist, or
• incorporated/registered in a jurisdiction included in the EU Blacklist and are not tax resident in any other jurisdiction that is not included in the EU Blacklist.

The following conditions apply:

• The company receiving the dividend holds directly, either alone or jointly with associated companies, over 50% of the capital, voting rights, or is entitled to receive more than 50% of the profits in the company paying the dividends.
• The associated companies should also be resident in an EU blacklisted jurisdiction or incorporated/ registered in an EU blacklisted jurisdiction and are not tax resident in any other jurisdiction that is not included in the EU Blacklist.

The WHT does not apply in the case of dividend payments on shares listed on a recognized stock exchange.

Interest

WHT at the rate of 17% (effective from 1 January 2024 / 30% up to 31 December 2023)  applies on interest paid by a Cyprus tax resident company to companies which are:

• resident in jurisdictions included in the EU Blacklist, or
• incorporated/registered in a jurisdiction included in the EU Blacklist and are not tax resident in any other jurisdiction that is not included in the EU Blacklist.

The WHT does not apply in the case of:

• interest payments on securities listed on a recognized stock exchange.
• Interest payments made by individuals.

Royalties (Article 21 of the ITL)

WHT at the rate of 10% applies on royalties paid by a Cyprus tax resident company to companies which are:

• resident in jurisdictions included in the EU blacklist, or
• incorporated/registered in a jurisdiction included in the EU Blacklist and are not tax resident in any other jurisdiction that is not included in the EU Blacklist.

The WHT does not apply in the case of royalty payments made by individuals.

The beneficiaries for the digital nomad visa are non-EU or non-EEA nationals who:

• work remotely using information and communications technology
• are employed and work remotely by their own company or another company, located outside of the Republic of Cyprus or are self-employed and their customers are located outside of the Republic of Cyprus
• can prove that they have sufficient and adequate monthly income to support their living in Cyprus, of at least €3,500, after the deduction of contributions and taxes

Digital Nomads will be granted a residence permit and will benefit from:

• the right to stay in Cyprus for up to one year, with the possibility to renew for two more years.
• the beneficiaries  family members can also stay in Cyprus for the same period and be granted with a residence permit that expires at the same time as the permit of the individual. The family members, however, are not allowed to provide dependent work or to engage in any kind of economic activity in Cyprus
• In case the Digital Nomads will spend more than 183 days in Cyprus during the same calendar year, then they will be considered Cyprus tax residents. Those that spend less than 6 months but more than 60 days, may also be considered as Cyprus tax residents subject to specific criteria.

Interested parties can enter Cyprus with the use of a tourist visa and submit an application to the Civil Registry and Migration Department within three months from their arrival to Cyprus.

In case the applicant is already residing in Cyprus under a different status, and fulfills the prerequisites then, can can apply to the Civil Registry and Migration Department, to obtain the digital nomad visa.

It should be noted that the initial limit for the Digital Nomad visas are 500 applications.

The main points of the plan are:

• Application for Cypriot Citizenship

The period of eligibility for applying for citizenship will be reduced from seven years of residence and work in the Republic, to five years and to four years for holders of certification for very good knowledge of the Greek language

• Simplification of the process for granting work permits

 The Ministry of Interior will amend the relevant Regulations of the Aliens and Migration Law, to simplify the process and determine the criteria based on which work permits will be granted

• Right to employment for family members of third country nationals

Spouses of third country nationals who have obtained a residence and work permit in Cyprus with a minimum gross monthly salary of €2,500 will have immediate and free access to employment. The scheme is not available for support staff.

• Revised policy for the issuance of temporary residence and work permits to third country nationals
  • Eligible Companies:
    • Foreign companies operating in Cyprus or wishing to have physical presence in Cyprus
    • Cyprus shipping companies
    • Cyprus high-tech/innovation companies (subject to conditions)
    • Cyprus pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.

• • Main provisions:
    •  A minimum gross monthly salary of €2,500 is introduced for employees who have the required academic skills or at least two years of relevant experience
    • Companies will be able to employ third country nationals as support staff (with gross monthly salary below €2,500) provided that the employment of third-country nationals does not exceed 30% of all support staff
    • The duration of the residence and work permit can be up to three years and will be issued within one month from the application date
    • The maximum number of third country nationals is 70% of the total number of employees in a 5-year period from the date of the inclusion of the company in the scheme
• Tax incentives
  • Expansion of the existing income tax exemption of 50% for taking up employment in Cyprus:
    • The personal income tax exemption of 50% will be expanded to cover new Cyprus tax residents-employees with salaried income of €55,000.
    • Existing beneficiaries of the scheme (income between €55,000 – €100,000) should be able to extend the exemption from 10 to 17 years.
  • Extension of the tax exemption for investment in innovative companies
    • Consideration of the possibility to grant the tax exemption of 50% for investment in certified innovative companies to corporate investors in addition to individuals
  • Increased tax deductions for Research & Development (R&D) expenses
    • Granting an increased tax deduction on R&D expenses (e.g. by 20%). Eligible R&D expenses will be deducted from taxable income equal to 120% of the actual.
• Digital nomad visa

A new type of residence permit will be introduced, for people who wish to live in Cyprus but work in companies operating abroad referred to as digital nomad visa.

Persons eligible for the “visa” are third country nationals who are self-employed or employees who work remotely using information and communication technologies, with employers/clients outside Cyprus.

Digital nomads will have the right to stay in Cyprus for up to one year, with the right to renew for another two years. They can be accompanied by their family members, to whom, upon request, a residence permit that expires at the same time as their dependent’s is granted. During their stay in Cyprus, the spouse or partner and the minor members of the dependent’s family are not allowed to provide dependent work or to engage in any kind of economic activity in the country. In case they reside in Cyprus for a total period exceeding 183 days within the same tax year, then they are considered Cyprus tax residents.

• • Prerequisites (among others):
    •  There is a minimum threshold of funds coming from abroad (supported by salary, bank statements, etc.) set to €3,500 per month, increased by 20% for the spouse and by 15% for any minor dependent
    • Medical insurance
    • Clean criminal record certificate from the country of residence

Tax treatment of provisions/impairment of receivables for tax purposes

1.  bad debts proved to the satisfaction of the Commissioner to have become irrecoverable during the year of assessment and actually written off during the same year notwithstanding that such bad debts were due and payable prior to the commencement of the said year, and
2. specific provision for doubtful debts in respect of which the Commissioner is satisfied that they have or will eventually become irrecoverable.

Are deductible for IT purposes (subject to conditions):

Companies other than credit institutions

 The application of IFRS 9 does not affect the tax treatment of write-offs/provisions of trade receivables that was applied by companies up to tax year 2017 (before the revised IFRS9). The tax treatment therefore remains as follows:

Allowed write-offs

1. Bad debt write-offs provided that the taxpayer proves that, despite any measures taken, and based on the specific facts, the receivables have become irrecoverable and were therefore written off.
2. Specific provisions for bad debts provided that the taxpayer proves that, despite any measures taken, and based on the specific facts, there are objective difficulties in recovering the amounts.

Non-allowable write-offs

1. General provisions for bad debts, that do not take into account the specific facts and circumstances of each case.

Expected credit loss calculated under the “simplified approach” but on an individual basis will be allowed. Any amounts calculated based on a provisions table/matrix (usually general) which is prepared on a collective basis is not accepted.

Consequently, for the purposes of determining the taxable income of persons for tax years from 2018 onwards, the provisions/impairment of trade receivables recognized under IFRS 9 should be deductible to the extent that they represent items as explained above.

Tax treatment of provisions/impairment of receivables for Deemed Dividend Distribution purposes

No adjustment should be made to the profit for Deemed Dividend Distribution purposes in respect of provisions/impairment of receivables recognized under IFRS 9.

This treatment applies to all companies, including credit institutions.

IFRS 15 – Revenue from Contracts with Customers

The Guideline issued by the Cyprus Tax Department provides that the tax treatment of income recognized under IFRS 15 should be consistent with the accounting treatment, both for income tax/corporation tax purposes and for the calculation of special defense contribution on deemed dividend distribution.

Therefore based on the above, no adjustments should be made to the income tax/corporation tax and deemed dividend distribution computations.

IFRS 16 – Leases

The application of IFRS 16 does not affect the tax treatment of leases and for the purposes of determining taxable income, the treatment that applied up to the year 2018 shall continue to apply. Consequently, the impact of IFRS 16 should be eliminated in the tax computation of the lessee.

Operating leases (as interpreted for the lessor)

The lessee is entitled to a tax deduction for the annual rent expense (based on the accrual basis), which is the annual cost of using the leased asset, provided that the relevant asset is used for business purposes. The necessary adjustment should therefore be made in the tax computation to claim this deduction.

Finance leases (as interpreted for the lessor)

The lessee is entitled to capital allowances on the cost of the lease asset (Right of Use) as well as any finance cost that relates to the lease. The necessary adjustment should therefore be made in the tax computation to claim the respective capital allowances.

Tax treatment of leases for DDD purposes

 No adjustment should be made to the accounting profit subject to deemed dividend distribution in relation to the accounting treatment of leases as per IFRS 16.

The basis of the law is that the lower of €8.550 and 20% of the remuneration from any employment exercised in Cyprus by an individual who was resident outside Cyprus the tax year before the year of commencement of employment in Cyprus is exempt from income tax.

The exemption applies for a five year period and is available to qualifying individuals commencing employment between 2012 and 2025. It is clarified that the exemption is provided in the five years that follow the year of commencing employment.