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Cyprus tax reform, introduced in December 2025 with most changes coming into full effect starting January 1, 2026, represents one of the most significant updates to the country’s tax framework in the past couple of decades.
Introduced as part of the broader effort to bring the Cyprus tax system in line with modern international standards, the reform includes changes for both local and international businesses, as well as for tax and non-resident individuals in Cyprus, and for high-net-worth individuals.
With the reforms spanning multiple areas and often proving difficult to navigate, this article outlines the key changes relevant to businesses, including sector-specific matters, individuals, and reporting changes.
Major Tax Changes for Businesses in Cyprus in 2026
The 2026 Cyprus tax reform introduces a number of structural changes to businesses operating in the country. These include the increase in the headline corporate tax, extending the research and development (R&D) deductions system to foster innovation, a new crypto tax, and other measures aimed at enhancing the country’s competitiveness as an international business hub.
| Tax area | Before 2026 | After 2026 |
|---|---|---|
| Corporate Income Tax | 12.5% | 15% |
| Company Tax Residency | Based on the management and control | Rules expanded |
| R&D Super-Deduction | 120% until 2025 | Extended to 2030 |
| Loss Carry Forward | 5 years | 7 years |
| Crypto and Share Option Tax | No dedicated tax | 8% flat tax |
| Transfer Pricing Documentation | Lower reporting thresholds | Increased thresholds |
| Stamp Duty | Applied to various transactions | Abolished for most transactions |
Sources: Cyprus Government Portal, Ernst & Young, PwC
1. Corporate Income Tax in Cyprus
One of the most important changes of the reform is the increase in the corporate income tax rate from 12.5% to 15% for Cyprus companies. This adjustment aligns the country with the global minimum tax standards introduced by the OECD.
Despite the increase, however, Cyprus remains one of the most tax-friendly jurisdictions within the European Union, given the parallel introduction of new incentives designed to maintain the country’s attractiveness for international businesses.
Sources: Cyprus Government Portal
2. New Tax Residency Rules for Cyprus Companies
The 2026 reform also extends the rules determining when a company is considered a tax resident in Cyprus.
Before 2026, companies used to follow the ‘management and control rules’ for tax residency. Today, however, the concept of a Cyprus tax resident company has been expanded to cover companies incorporated under the Cyprus Companies Law, irrespective of any parallel tax residency status abroad.
Without sufficient evidence of tax residency in another jurisdiction, a business will be considered a tax resident of Cyprus.
3. R&D Super-Deduction Extended Until 2030
The famous R&D “super” deduction of 120% on qualifying intangible asset expenditure, reducing effective taxable income for innovation-focused companies, is now extended until 2030.
In practice, this incentive reduces the effective tax burden for businesses investing in new technologies and software development, intellectual property, and other innovation-focused activities.
Notably, this amendment is also relevant for the 2025 tax year, as the previous framework covered only the 2022–2024 period.
4. Extension of Loss Carry-Forward Period from 5 to 7 Years
The loss carry-forward period for companies operating in Cyprus was extended from 5 to 7 years, enabling firms to preserve tax losses for longer against future taxable profits.
The longer carry-forward window enables greater flexibility for startups in capital-intensive industries that often require several years to become profitable. What’s more, this change is particularly attractive for any business facing significant losses or frustrating revenues during the initial growth phases.
Sources: Cyprus Government Portal
5. New 8% Crypto Tax and for Share Option Schemes
For the first time ever, the Cyprus tax system introduced a flat 8% rate on income generated from activities related to cryptocurrency for both individuals and legal entities. This tax applies to profits generated from selling, exchanging, gifting, or using cryptocurrencies as payment. In addition, employee stock option schemes will also be taxed at a flat 8% tax, replacing the legacy income tax treatment, deemed more complex.6. Increased Thresholds for Transfer Pricing Documentation
To reduce administrative burden for businesses, the Cyprus tax reform has introduced changes to the transfer pricing documentation, increasing the thresholds for multinational companies. Reportedly, thresholds that trigger mandatory pricing documentation requirements will increase for:- Sale of goods transactions (exceeding EUR 5 million);
- financial transactions (exceeding EUR 10 million);
- Other transactions (exceeding EUR 2.5 million).
7. Abolition of Stamp Duty on Most Transactions
Stamp duty has now been abolished for most business transactions in Cyprus, reducing administrative costs and increasing the company’s economic efficiency. Previously, various contracts could trigger stamp duty obligations; under the new system, the majority of these transactions will no longer be subject to the tax, increasing the overall appeal of Cyprus company incorporation.What Has Remained the Same
Despite significant tax changes, several key features that historically made Cyprus a tax haven attractive for international businesses remained unchanged. These include:- Non-Dom Tax Regime: Qualifying individuals who are not tax residents of Cyprus are exempt from tax on dividends and interest income.
- Participation Exemption: Cyprus continues to offer a participation tax exemption for holding companies, allowing them to receive dividends from subsidiaries under favourable tax conditions.
- IP Box Regime: This regime remains in effect and provides up to an 80% tax exemption on qualifying intellectual property profits.
- Notional Interest Deduction (NID): This rule enables companies to reduce taxable income on new equity financing.
- Securities Sale Capital Gains Tax: Remains 0%.
- Residency Rules: Existing rules for determining tax residency for 60-day and 183-day stays continue to apply.
Major Tax Changes for Individuals in Cyprus in 2026
Beyond impact on corporations, Cyprus introduced several important updates affecting individuals, both residents and foreigners. While the changes include new tax brackets and additional deductions, the reform effectively preserves the core features that have historically made Cyprus an attractive jurisdiction for both local and expat entrepreneurs.| Tax area | Before 2026 | After 2026 |
|---|---|---|
| Personal Income Tax | EUR 0-19,500: 0% EUR 19,501-28,000: 20% EUR 28,001-36,300: 25% EUR 36,301-60,000: 30% over EUR 60,001: 35% | EUR 0-22,000: 0% EUR 22,001-32,000: 20% EUR 32,001-42,000: 25% EUR 42,001-72,000: 30% over EUR 72,001: 35% |
| Family, Housing, and Environmental Incentives | - | Family-related: up to EUR 2,000 per child (per parent); Housing: up to EUR 2,000 (for each spouse/ partner); Environmental: up to EUR 1,000 (for each spouse/ partner). |
| Entertainment Expenses | The lower of 1% of turnover or EUR 17,086 | The lower of 1% of turnover or EUR 30,000 |
| Special Defence Contribution (SDC) | 17% | 5% or 0% (in certain cases) |
| Redemption of Investment Units | Treated as a disposal of securities | Treated as a dividend |
| Tax Residency | Only after proving being not a tax resident elsewhere | Maintain a physical presence for 60 days |
| No-Dom Status | 17 years | Possibility to extend up to 27 years |
| SDC Exemption (For Expats) | 17% | 0% |
Taxation for Cyprus Residents in 2026: What’s New?
1. New Progressive Income Tax Brackets
One of the central changes is the restructuring of personal income tax brackets. The reform increases the tax-free income threshold, allowing individuals to earn a higher amount before becoming subject to (higher) personal income tax. That said, the tax-free threshold for resident individuals has been increased from EUR 19,500 to EUR 22,000. While the wealthy will continue to fall within the upper bracket of the Cyprus progressive tax system, this reduction makes life easier for low- and middle-income individuals, with the increased threshold and revised band structure.2. Family, Housing, and Environmental Incentives
Cyprus introduced new deductions that are very important in reducing living expenses in Cyprus. Taxpayers may benefit from new deductions connected to:- Family-related expenses: Tax relief ranges from EUR 1,000 to EUR 2,000 per child, per parent, for families with gross income of up to EUR 200,000.
- Housing benefits: Available for expenses such as rent and mortgage interest, up to EUR 2,000 for each spouse or partner.
- Environmental benefits: Eligible green home improvements may qualify for deductions of up to EUR 1,000 for each spouse or partner.
3. Higher Entertainment Expenses
The new tax reform introduces a deductible system for entertainment expenses. From 2026, the deductible limit increased from the lower of 1% of turnover or EUR 17,086 to EUR 30,000 to support commercial and business development activities.4. Special Defence Contribution (SDC)
The Special Defence Contribution has been significantly reduced from 17% to 5% for actual dividends distribution (for both Cyprus tax resident and Cyprus domiciled) or abolished for specific categories of income. This change substantially lowers the tax burden on investment income for many taxpayers and enhances Cyprus’s overall attractiveness as a tax haven. Sources: Cyprus Government Portal
5. Taxation of Redemption of Investment Units
Clauses in the Cyprus tax reform document mention the taxation of the redemption of units from collective investment schemes and similar financial instruments.
Effective from 2026, the redemption of units in corporate-form funds will be treated as a dividend instead of as a disposal of securities, which is the treatment currently applied.
How Non-Residents Living in Cyprus Are Taxed in 2026?
1. Tax Residency
Cyprus is overhauling its tax system for 2026, simplifying the 60-day residency rule by removing the requirement not to be a tax resident elsewhere.
This means that individuals can obtain tax residency status if they meet the presence requirements (maintain a home and/or have business ties in the country) and no longer need to prove they are not a tax resident in another country or spend years in Cyprus.
2. Non-Domiciled (Non-Dom) Status Extension
The non-domiciled tax status, one of the most attractive features of the Cypriot tax system, remains available and is further extended under the 2026 reform.
Once an individual has spent 17 years in Cyprus and is deemed Cyprus tax domiciled, a further five-year extension of non-dom status may be obtained through an EUR 250,000 lump-sum investment.
This status may be renewed twice, with a lump-sum amount payable upon each renewal, thereby extending non-dom benefits from the initial 17-year period to up to 27 years in total.
3. Exemption from Special Defence Contribution (SDC)
Individuals who aren’t domiciled residents of Cyprus are exempt from the Special Defence Contribution on dividends, interest, and rental income during the qualifying period.
Compliance, Reporting, and Administrative Changes
1. Digital Reporting
According to the reform, all Cypriot tax residents must now file annual tax returns, which is necessary to have a unified reporting system in line with the current international reporting standards.
People aged 25 years and older are now required to file tax returns, regardless of whether they have a small or no amount of income or whether they are exempt from Cyprus taxation.
2. Double Tax Treaties
Cyprus has signed double tax treaties with 71 countries, courtesy of its main online source, allowing companies and individuals to avoid being taxed twice on the same income.
Under the new reform, where a claim for a tax credit in relation to foreign taxes paid is submitted more than six years after the end of the relevant tax year, but within six months from the date on which the corresponding foreign tax payable has been determined, the tax assessment may be completed within one year from the submission of the relevant supporting documents and information.
3. Penalties and Enforcement for Businesses and Individuals
The tax reform in Cyprus introduces stronger measures to ensure compliance with existing legislation in the country.
Namely, stricter penalties are to be enforced in case of non-compliance with the provisions of Cyprus’ corporate tax laws:
- Criminal offences under the Special Contribution for the Defence Law of 2002: Increasing from EUR 854.30 to EUR 5,000 for first offenders and from EUR 1,025 to EUR 10,000 and/or from 6 months to 2 years’ imprisonment for repeat offenders.
- Administrative fines: The amended provisions establish either fixed penalties ranging from EUR 200 to EUR 4,000 or percentage-based fines for failure to settle due taxes, starting at 5% and rising by an additional 5% once the delay extends beyond two months.
Directors, shareholders, and officers may be held responsible for offences committed under the Cyprus corporate tax laws, including the filing of false information.
Final Thoughts: Where Cyprus Stands Post-Reform?
Following the 2026 tax reform, Cyprus remains a highly attractive and tax-efficient European jurisdiction. While certain adjustments aligning the country with international standards undermine its attractiveness, the broader framework balances the situation and still stands highly sought-after in the eyes of global businesses and individuals from around the world.
Contact Inteliumlaw for professional guidance in registering a business in Cyprus or adapting to the new tax environment in the country.
