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

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 income tax arising from the submission of the provisional tax return is payable in two equal instalments on:

• 31 July 2017
• 31 December 2017

If any instalment is not paid by the end of the month following the above due dates, interest is chargeable at 3.5% and a penalty of 5% on the tax due.

In case the provisional taxable income declared is less than 75% of the final taxable income for the year, then an additional tax of 10% of the difference between the final tax due and the provisional tax paid is added.

Taxpayers are eligible to revise their provisional tax calculation by submitting a revised provisional tax return until 31 December 2017.

• 31 July 2016
• 31 December 2016

If an installment is not paid by the deadline date, interest is chargeable at the rate of 4% per year. If both installments are missed then a penalty of 5% is imposed.
It should be noted that the interest is charged if the payment is made after the completion of the month following the due date i.e. 31 August 2016 and 31 January 2017.

In case the provisional tax paid is less than 75% of the final tax, an additional penalty of 10% is imposed on the difference of the provisional tax paid and the final tax.

The provisional tax return should be completed and submitted by both individuals and legal persons who earn taxable income.

Please contact us at 00257-25368823 and at tasos@nconstantinou.com in case you require any further information or assistance with the completion of the return.