On 22 December 2025, and following a long public consultation exercise, the House of Representatives voted into law, the provisions constituting the Cyprus Tax Reform.
The Cyprus Tax Reform 2026 introduces a comprehensive modernization of the country’s tax framework, aligning it with international standards, enhancing transparency, and strengthening competitiveness. The reform reflects Cyprus’ commitment to EU directives, OECD guidelines, and evolving global tax practices.
The main provisions include the following:
Tax relief measures for individuals
- The tax-free threshold increases from €19,500 to €22,000 and various tax credits are provided for family incomes below €100,000 (or €150,000/€200,000 for large families with more than 3 and 5 children respectively).
- Strengthening of the 60-days tax residency rule, by removing the requirement for the individual not to be a tax resident of another jurisdiction for the same tax year.
- The tax-free amount for Ex gratia payments (voluntary/early retirement-termination) increases from €20,000 to €200,000. Amounts exceeding €200,000 are taxed at 20% (not deductible for the employer).
- A tax-free amount €200,000 for Compensation for termination of employment or office not specifically provided for in the terms of employment. Amounts exceeding €200,000 are taxed at a 20% (not deductible for employer).
- A special tax rate of 8% on benefits arising in the form of share option rights or rights for acquisition of shares for non-related Cyprus tax resident employees and/or directors of a company. (Eligibility conditions exist).
- Extension of 9% deemed benefit on financing transactions to indirect shareholders.
- The CGT lifetime exemptions bands are increased from €85,430 to €150,000 for private residence disposals, from €25,629 to €50,000 for agricultural property and from €17,086 to €30,000 for any other disposals.
New tax measures for businesses
- Strengthening the company tax residency status in Cyprus by introducing the criteria of Incorporation under the Cyprus Company Law, irrespective of whether or not the company is treated as a tax resident of another jurisdiction.
- The deemed distribution of dividends for profits from January 1, 2026, is abolished.
- The Special Defence Contribution (SDC) on actual dividend distribution is reduced from 17% to 5%.
- The Special Defence Contribution (SDC) 3% on rental income is abolished.
- The concept of Disguised Dividends is introduced for direct and indirect shareholders who are natural persons. A tax rate of 10% applies on the disguised dividends (double the normal 5% SDC rate on dividends).
- Corporate Tax increases from 12.5% to 15%.
- A reduced 8% tax rate is established for gains from the disposal, gift, exchange and use(as a mean of payment) of crypto assets, unless such gains arising on assets acquired through Minning.
- WHT on dividends paid to low taxed jurisdictions is reduced to 5% while it remains at 17% for dividends paid to blacklisted jurisdictions
- Loss carry-forward period is extended from five to seven years.
- Extension of the 120% super deduction for R&D expenditure on intangible assets to 2030.
- A transitional period of 5 years for the treatment of gain from the redemption of units in investment funds. As from 2031, such gain will be considered as dividend rather than capital gain.
- A Listing exemption of €300,000 is given for every three-year period to a Company listed on the Stock Exchange for first time.
- Green Transition and Digital Transformation incentives for businesses in the form of super deductions on qualifying expenditures, along with accelerated depreciation benefits.
- Elimination of stamp duty’s horizontal imposition. Stamp duty will only be applied to agreements involving real estate, banking and insurance.
- The threshold for intra-group transactions subject to audit is increased to €2.5 million.
- Non-Dom individuals, option to extend the non-Dom period for up to 2 consecutive 5-years periods, by paying a lump sum annual amount of €50,000 in single lump sum instalments of €250,000 each.
Tackling tax evasion and new audit mechanism
The reform also introduces mechanisms to combat tax evasion, with a more effective and fair process.
The Commissioner of Taxation has the authority to suspend business operations and seal the premises of an enterprise if certain serious tax-related violations occur provided that 3 prior separate notifications were sent to the business.
