We would like to inform you that the Cyprus House of Representatives approved a new tax reform package on 22 December 2025, with implementation expected from 1st January 2026.
Below is a practical summary of the main changes:
A. Individuals (Personal Income Tax)
Tax-free threshold increased to €22,000.
New income tax bands (as reported in the final package):
€22,001 – €32,000: 20%
€32,001 – €42,000: 25%
€42,001 – €72,000: 30%
Above €72,001: 35%
Family/children deductions increased and become more generous as the number of children rises (e.g., €1,000 for one child; €1,250 per child for two children; €1,500 per child for three or more).
Higher income ceilings for eligibility for family-related deductions (increased on a sliding scale up to €200,000 depending on number of children).
Mortgage interest / rent deduction increased to up to €2,000 (for serviced housing loans and rent).
For energy upgrading of a primary residence or for the purchase of a new electric vehicle, a deduction of up to €1,000 is granted
Stamp duty is abolished.
In case of a primary residence the exemption is increased from €85,430 to €150,000
B. Companies / Investments (key items)
Corporate Income Tax increased from 12.5% to 15% (aligned with international developments).
Deemed Dividend Distribution regime abolished for profits from 1 January 2026 onwards.
Special Defence Contribution (SDC) on actual dividends reduced from 17% to 5% (for profits generated after 1 January 2026).
SDC on rental income abolished.
Crypto disposals: introduction of a flat 8% tax on profits from disposal of crypto assets.
The loss carry-forward period is extended from 5 years to 7 years
The deadline for submission of corporate tax returns is moved to 31 January of the second year following the tax year, and this date will also apply to the payment of corporate tax.
Mandatory submission of income tax returns by partnerships is introduced.
What you should do now
These changes may affect your 2026 tax planning (salary structures, dividend policy, rental structures, group/company planning, etc.). We recommend reviewing your position early so you can benefit from the new thresholds and deductions and remain compliant.
If you would like us to assess the impact for you (personal and/or corporate), please reply to this email or contact our office.
