Cyprus Tax Reform 2026 – A New Era for Individuals and Businesses
For the first time in over 20 years, Cyprus is set to launch a full overhaul of its tax system. The reform — described by the Finance Minister as a “flagship project” — aims to modernise the system, ensure fairness, and align with international standards.
The six amendment bills, submitted to Parliament on 30 October 2025, are expected to take effect on 1 January 2026.
Why This Reform Matters
The new framework balances fairness, competitiveness, and simplicity:
Fairer burden – more support for middle-income earners and SMEs.
International alignment – full compliance with OECD BEPS 2.0 and EU rules.
Digital modernisation – simpler, faster, and more transparent tax administration.
Business credibility – maintaining Cyprus’s low-tax appeal while boosting trust.
For Individuals: Relief and Simplicity
Higher Tax-Free Threshold – €20,500 (up from €19,500).
New Deductions – up to €1,500 for housing and €1,000 for green or family-related expenses.
Retirement Lump Sum – tax-free up to €200,000 (was €20,000).
Stock Options – new 8% regime for approved plans.
All Residents 25+ – must file annual returns for transparency.
SDC Simplified – reduced to 5% on actual dividends (Non-Doms stay exempt).
Foreign Pensions – simplified flat 5% regime above €5,000.
For Businesses: Clarity and Competitiveness
Corporate Tax – rises modestly to 15%, still among the lowest in the EU.
Simplified Dividend Rules – deemed-distribution abolished; 5% SDC applies to real dividends.
Crypto and R&D – 8% flat tax on crypto gains; R&D super-deduction extended to 2030.
Loss Carry-Forward – extended to seven years.
Transfer Pricing – higher thresholds and simplified compliance.
Digital Filing & Enforcement – full online reporting, extended audit powers, and GAAR introduction.
What Stays the Same
Non-Dom & Employment Incentives remain intact.
Residency Tests (183 & 60 days) unchanged.
Capital Gains Tax still limited to Cyprus property.
No Withholding Tax on outbound dividends and interest.
IP Box and NID regimes continue.
VAT Rates remain stable at 19%.
Preparing for 2026
Businesses and individuals should start planning now:
Recalculate tax exposure and corporate forecasts.
Separate pre- and post-2026 profits for SDC purposes.
Review investment, dividend, and crypto strategies.
Stay alert for final legislative updates and Tax Department guidance.
Cyprus’s 2026 Tax Reform is not just about rates — it’s about fairness, modernization, and long-term competitiveness.
Early preparation will help taxpayers turn reform into opportunity.
Our team of specialists at PHS & Partners, has the experience, knowledge and passion to deliver the right and most favourable tax outcome to help your business grow.
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