Cyprus Tax Reform 2026 Explained

On 22 December 2025 the Cyprus Parliament approved the largest overhaul of the tax system in about twenty years. It took effect on 1 January 2026. If you own a Cyprus company, draw dividends from one, or let property here, several things that were true last year are not true now.

This is what changed, and, more usefully, what it means in practice.

Corporate tax: 12.5% to 15%

The headline rate rose to 15% for tax years from 2026. The 12.5% rate still applies to 2025 and earlier, so a return you file this year for an earlier period is unaffected.

The increase brings Cyprus into line with the OECD global minimum. It is worth keeping in proportion: 15% remains at the lower end of the European Union, and the surrounding framework, no withholding tax on outbound dividends to non-residents, an extensive treaty network, the IP Box regime, is untouched.

Dividends: the tax fell sharply

Special Defence Contribution on dividends dropped from 17% to 5%, for dividends paid out of profits earned from 2026 onwards. That applies to individuals who are Cyprus tax resident and domiciled here.

If you are non-domiciled, nothing changed, because you were already exempt. That is the point most commentary buries: the reform made the domiciled position considerably better without touching the non-domiciled one.

For an owner-manager who has passed the non-dom window, the arithmetic on taking profits has changed materially. If you last looked at your salary-and-dividend split before 2026, it is worth looking again.

Deemed dividend distribution: abolished, with a trap

The deemed distribution rules treated a company as having distributed 70% of its after-tax profits two years after the year end, whether or not a dividend was actually paid, and charged SDC on the deemed amount. It caused unexpected liabilities for years.

It is abolished for profits earned from 1 January 2026.

But not for 2024 and 2025. Undistributed profits from those two years stay within the old regime, 2024 profits until the end of 2026, and 2025 profits until the end of 2027. If your company is carrying retained profits from those years, the abolition does not reach them, and the timing of any distribution out of those specific years deserves thought rather than assumption.

Personal income tax: a higher tax-free threshold

The tax-free band rose from €19,500 to €22,000, and the bands above it were revised. For most employees the effect is a modest reduction; for lower salaries it is proportionally larger.

• Up to €22,000, nil
• €22,001 to €32,000, 20%
• €32,001 to €42,000, 25%
• €42,001 to €72,000, 30%
• Above €72,000, 35%

Social insurance and GESY contributions are separate from this and unchanged by the reform.

Stamp duty: gone entirely

The Stamp Duty Law was repealed with effect from 1 January 2026. Documents executed on or after that date are not subject to it.

In day-to-day corporate work this removes a small but persistent friction: shareholder agreements, intra-group loans, restructuring documents and service contracts no longer need stamping. Documents signed before the end of 2025 remain within the old framework under transitional rules.

Rental income: SDC abolished, and a new obligation

Special Defence Contribution on rents is abolished. Rental income is now subject to income tax only, which simplifies the position for landlords considerably.

In exchange, rent on Cyprus immovable property must now be paid electronically, bank transfer, card, or another recognised electronic method. Cash rent is no longer an option in practice, and landlords should move any remaining cash arrangements onto a traceable footing.

Losses: seven years instead of five

The period for carrying tax losses forward was extended from five years to seven. For a business with early-stage losses, that is a meaningful extension of the window in which they can be used.

Crypto and share options

A flat 8% rate was introduced on two things that previously sat awkwardly in the income tax rules: gains on crypto assets, and benefits from employee share options.

Crypto

Profits from the sale, exchange, donation, or use of crypto assets as payment are taxed at 8%. Crypto acquired through mining sits outside the regime.

Losses are treated narrowly. A crypto loss can only be set against a crypto gain in the same year. It cannot be carried forward, and it cannot be used in group relief. That asymmetry is worth understanding before you realise a loss deliberately.

Share options

Benefits from share option rights, for employees and directors, are taxed at the same flat 8%, subject to two limits.

The 8% applies to the part of the benefit not exceeding twice the employment remuneration in the vesting year, with an overall cap of €1 million across a ten-year employment period. Anything above those limits is taxed at the ordinary progressive rates.

Grants between related parties under Article 33 of the Income Tax Law are excluded from the flat rate entirely.

What this means for you

If you own a Cyprus company and are domiciled here: the cost of taking profits out has fallen substantially. Revisit your salary and dividend split.

If you are non-domiciled: your position on dividends, interest and rent is unchanged. The corporate rate rise affects the company, not your personal exemption.

If your company holds retained profits from 2024 or 2025: the deemed distribution rules still apply to those profits. This is the one to look at first.

If you let property in Cyprus: your rental income is simpler to tax and must now be collected electronically.

If you are relocating here: the higher tax-free threshold and the unchanged non-domicile regime make the arithmetic better than it was, not worse.