Cyprus is implementing a major tax reform that will come into effect on January 1, 2026. This is the first large-scale modernization of the tax system in more than 20 years. The reform aims to increase fairness, support families and businesses, and align the Cypriot tax framework with international standards.

Corporate Tax Changes :

1. Corporate Income Tax 

• The corporate income tax rate will increase from 12.5% to 15% for all companies, including international structures.

2. Dividend Taxation

• The Deemed Dividend Distribution rule will be abolished.
• The Special Defence Contribution (SDC) on actual dividends will be reduced from 17% to 5%, making profit distribution significantly more attractive.

3. Cryptocurrency Tax

• A new 8% tax will apply to gains from cryptocurrency transactions, introducing transparency and regulation for digital assets.

4. Loss Carry-Forward

• The carry-forward period for tax losses will be extended from 5 to 7 years, offering more flexibility for business planning.

Changes Affecting Individuals :

1. Income Tax Threshold

• The tax-free threshold for individuals will increase from €19,500 to €20,500, making it one of the highest minimum thresholds in the EU.

2. Updated Tax Brackets

• The progressive tax scale remains in place, but the brackets will be adjusted to reduce the tax burden for many categories of taxpayers.

 

New Administrative Requirements :

1. Annual Tax Filing

• Starting in 2026, all Cypriot tax residents aged 25 and over will be required to file an annual tax return, regardless of their income level.

2. Transfer Pricing

• Updated rules and thresholds will apply to transfer pricing compliance, affecting large international groups and companies with cross-border transactions.