The House of Representatives approved the tax reform package on 22 December 2025. The amending laws were published in the Official Gazette on 31 December 2025 and most measures took effect on 1 January 2026. This note sets out the changes that matter in practice.
For companies
- Corporation tax rises from 12.5% to 15%. The increase aligns Cyprus with the OECD global minimum rate. It applies to trading profits; the exemptions on dividend income and on gains from the disposal of securities are unaffected.
- Special Defence Contribution on dividends falls from 17% to 5%. SDC continues to apply only where the shareholder is both tax resident and domiciled in Cyprus.
- Deemed dividend distribution is abolished for profits of 2026 onwards. Transitional rules govern profits earned up to 2025 — see our note on the abolition of deemed distribution.
- Tax losses may now be carried forward for ten years, up from five, subject to conditions. Group loss relief continues to apply.
- Stamp duty is abolished.
- The foreign permanent establishment exemption is narrowed: profits of a permanent establishment situated in an EU non-cooperative jurisdiction no longer qualify.
- The 120% super-deduction for qualifying research and development expenditure is extended to 2030, and a similar 120% deduction is introduced for qualifying agricultural and livestock machinery and installations.
For individuals
- The tax-free threshold rises to €22,000. The revised bands are 20% on income from €22,001 to €32,000, 25% to €42,000, 30% to €72,000, and 35% above that.
- Foreign pension income: the flat 5% election remains, and the exempt amount rises from €3,420 to €5,000.
- Gains on cryptoasset transactions are brought into charge at a flat 8%.
- Non-domiciled status and the 50% exemption for first employment in Cyprus both survive the reform — see our note on both reliefs.
What did not change
It is worth being equally clear about what the reform left alone, because a good deal of commentary implied otherwise:
- VAT — the standard rate remains 19%, with reduced rates of 9%, 5% and 3%, and the registration threshold stays at €15,600 of annual turnover.
- The intellectual property regime — the 80% deduction on qualifying IP profits is intact. Because the corporate rate rose, the effective rate on qualifying profits moves from roughly 2.5% to roughly 3%.
- Social insurance and General Healthcare System contributions.
- The double tax treaty network, and the absence of withholding tax on dividends and interest paid to non-residents, subject to the existing defensive measures for non-cooperative and certain low-tax jurisdictions.
- The exemption for profits on the disposal of shares and other titles.
Three things worth reviewing now
- The timing of distributions out of pre-2026 profits. The transitional rules make the year in which historic profits arose relevant to the SDC treatment of a distribution.
- Loss positions. A ten-year window changes the arithmetic for companies in an investment or start-up phase, and for groups considering how to allocate activity.
- Group structures with activity in listed non-cooperative jurisdictions, given the narrowing of the permanent establishment exemption.
This note is a general summary of Cyprus tax law as it stands in August 2026 and is not professional advice. Rates, thresholds and reliefs change, and how they apply depends on the facts of each case. Please contact us before acting on anything set out here.