Cyprus Tax Reform 2026: Summary of Proposed Legislative Amendments

Cyprus is in the process of examining a wide-ranging reform of its tax framework, representing the most substantial legislative update in more than two decades. The Government has submitted a package of draft amendment bills to the House of Representatives for consideration. At this stage, all measures remain proposals and are subject to parliamentary deliberation, potential modification, and formal approval.

Subject to enactment, the proposed amendments are expected to enter into force on 1 January 2026, with the stated objective of enhancing fairness, modernising tax administration, and aligning the Cyprus tax system with prevailing OECD and EU standards.

Why the Reform Matters

• Relief for households and SMEs through updated deductions and thresholds.
• Alignment with OECD BEPS 2.0 and EU standards.
• Modernised tax administration with digitalisation and enhanced compliance.
• Preservation of Cyprus’s competitiveness as a business hub.

Key Changes for Individuals

• Tax-free threshold increased to €20,500.
• New deductions for families, students, primary-residence costs, and energy upgrades.
• Additional deductions for disability and home insurance.
• Voluntary retirement exemption increased to €200,000.
• New 8% tax regime for approved stock-option plans.
• Mandatory tax filing for all residents aged 25+.
• Deemed dividend abolished; SDC on dividends reduced to 5%.
• Non-Dom exemptions remain unchanged.
• Foreign pensions: option between progressive rates or 5% flat tax above €5,000.

Key Changes for Businesses

• Corporate income tax increases from 12,5% to 15%.
• Deemed dividend distribution abolished for post-2026 profits; SDC reduced from 17% to 5%.
• Crypto disposals taxed at 8%; loss carry-forward extended to seven years.
• R&D 120% super-deduction extended to 2030; green incentives also extended.
• Higher limits for deductible entertainment and listing costs.
• Enhanced allowances for agricultural and livestock investments.
• Increased transfer pricing thresholds and administrative updates.
• Introduction of a General Anti-Abuse Rule (GAAR).

What Remains Unchanged

• The Non-Dom regime.
• 60-day and 183-day residency rules.
• No capital gains tax on securities.
• No withholding tax on outbound dividends/interest (anti-abuse applies).
• VAT, NID, IP Box, and participation exemptions remain intact.

How to Prepare

• Review income and profit allocations.
• Segment pre-2026 and post-2026 profits.
• Update corporate tax planning and cash-flow forecasts.
• Reassess structures involving crypto, IP, equity or cross-border investments.
• Prepare for updated filing and compliance obligations.

Our legal team in Cyprus is ready to assist you with the following:

• Personal and corporate tax planning.
• Non-Dom and relocation advisory.
• Holding-structure and dividend optimisation.
• Crypto and stock-option tax guidance.
• Support with 2026 compliance requirements.

Contact us at [email protected] or [email protected]  to make informed decisions and take full advantage of the opportunities ahead with expert guidance and comprehensive support.