The Cyprus Tax Reform 2026

A comprehensive set of tax reforms was published in the Official Gazette on 31 December 2025, introducing wide-ranging changes effective from 1 January 2026. These amendments aim to modernize the tax framework, support economic activity, enhance compliance, and strengthen the Tax Department’s enforcement capabilities.

This document provides a consolidated overview of the key legislative updates to help individuals and businesses understand the changes and assess their impact.

1. INCOME TAX LAW AMENDMENTS

Revised Personal Income Tax Bands

The tax-free threshold increases from €19,500 to €22,000. 

Other Personal & Corporate Income Tax Amendments 

-Corporate tax rate increased to 15%
-Crypto‑asset disposal profits taxed at 8%
-Company tax residency expanded to include incorporation test
-Removal of “not tax resident elsewhere” condition for 60‑day rule
-Tax loss carry‑forward extended to 7 years
-R&D 120% super‑deduction extended to 2030
-Entertainment expense cap increased to €30,000
- Preferential 8% tax regime for employee share options 
- Fund redemptions treated as dividends from 2031 
- Ex‑gratia termination payments taxed at 20% after €200,000 exemption 
- Intangible assets with indefinite life amortised over 20 years 
- 25% capital allowances for agricultural/livestock machinery 
- Overseas pension regime: 5% on amounts above €5,000 
- Interest income for companies taxed solely under income tax 
-  Up to €50,000 deduction for donations to approved cultural institutions
-  Updated Cyprus Local File thresholds: 
-  €10m financing 
-  €5m goods 
-  €2.5m other transactions

2. SPECIAL DEFENCE CONTRIBUTION (SDC) AMENDMENTS 

- Deemed dividend distribution abolished for profits earned after 1/1/2026 
- SDC on actual dividends reduced from 17% to 5% 
- SDC on rental income abolished 
- 5% withholding tax on dividends to low‑tax jurisdictions 
- SDC on interest income applies only to individuals 
- Lump‑sum SDC regime for long‑term non‑domiciled individuals: €250,000 per 5‑year period

3. CAPITAL GAINS TAX (CGT) AMENDMENTS 

- Lifetime exemptions increased: 
- General: €30,000 
- Agricultural land: €50,000 
- Primary residence: €150,000 
- Immovable property definition expanded to include share disposals where 20%+ of value derives from Cyprus real estate 
- Exchange of land for building/plots included in exemptions 
- Up to €50,000/year CGT exemption for non‑regulated exchange shares 
- Primary‑residence exemption for loan restructuring increased to €450,000 (valid until 31/12/2030)

4. REPEAL OF THE STAMP DUTY LAW

Stamp Duty Law abolished for contracts executed on or after 1 January 2026.

5. ASSESSMENT & COLLECTION OF TAXES – COMPLIANCE CHANGES

- Mandatory audited‑accounts threshold for individuals increased to €120,000 
- Corporate tax returns & payments due by 31 January of the second year after the tax year 
- Mandatory personal tax return for all Cyprus tax‑resident individuals aged 25–71 
- Extension request deadline increased to 60 days 
- Statute of limitations: 6 years from submission of return 
- Immediate payment of final tax upon filing 
- Rent above €500 must be paid electronically 
- Directors remain liable for actions/omissions during their term even after resignation

Enforcement Measures

The Commissioner of Taxation may suspend business operations for:

- Failure to submit tax returns 
- Failure to pay taxes 
- Failure to issue or correct invoices/receipts

CONCLUSION

The 2026 tax reform introduces significant structural changes affecting individuals, families, and businesses. This document is designed to support your organization in understanding and preparing for the new requirements.

CONTACT DETAILS  

Silva Karamanis - silva@aerotrust.eu 
Andreas Koumi – accounting@aerotrust.eu