Cyprus Tax Reform 2026: Everything That Changed on 1 January

Cyprus enacted its most significant tax overhaul in over two decades at the end of 2025. The reform package was approved by the House of Representatives on 22 December 2025 and published in the Government Gazette on 31 December 2025, taking effect for the 2026 tax year onward. This guide pulls every headline change into one place, each stated with its statute, scope and effective date.Cyprus tax reform laws, Government Gazette, 31 December 2025 (approved by the House of Representatives 22 December 2025)

A word of method before the detail: several figures circulated in draft form during 2024–2025 and changed before enactment, so every number below reflects the published law, not the earlier proposals. Where a figure is technical or transitional, treat this as an orientation map and confirm the specific position with a licensed Cyprus adviser. For the corporate base in isolation, our Cyprus corporate tax guide 2026 goes deeper; for the whole system, see the complete Cyprus taxes guide.

What actually changed on 1 January 2026?

In one line: the corporate rate went up, most shareholder-level taxes came down, the deemed distribution regime was scrapped, personal thresholds widened, crypto got a dedicated charge, and stamp duty was largely removed.The reform is best read as a rebalancing — a higher corporate headline rate traded for materially lower tax when profits reach the owner.

Did Cyprus corporate tax really rise to 15%?

Yes. The corporate income tax rate rose from 12.5% to 15% for tax years beginning on or after 1 January 2026, under the amended Income Tax Law, aligning Cyprus with the OECD Pillar Two global minimum effective rate for large groups.Income Tax Law N.118(I)/2002, as amended by the 2026 tax reform

The 2.5-point increase is the reform's most visible cost, but two points keep Cyprus competitive. First, the IP Box regimecontinues to deliver an effective rate of roughly 2.5%–3% on qualifying intellectual-property income, because the 80% notional deduction now sits on top of the 15% base rather than the old 12.5%. Second, the shareholder-level cuts below mean the combined corporate-plus-distribution burden for many owner-run companies actually falls, not rises. The rate change is qualitative proof of Cyprus honouring its OECD commitments while keeping the substance-based incentives that attract holding and IP structures.

How are dividends and the SDC affected?

The Special Defence Contribution on dividends fell from 17% to 5% for domiciled Cyprus tax residents, in respect of profits earned from 1 January 2026 onward. The SDC on rental income was abolished entirely, and non-domiciled residents continue to pay 0% SDC.Special Defence Contribution Law N.117(I)/2002, as amended by the 2026 tax reform

The timing rule matters. The 5% rate attaches to the profits from which a dividend is paid, not to the payment date, so dividends distributed out of pre-2026 retained profits generally keep the legacy 17% rate for a transitional window. Companies sitting on older reserves should model both layers before declaring. For non-domiciled residents the headline is unchanged: the non-dom regime still shelters dividends and interest from SDC entirely for up to 17 years, so the 5% cut mainly benefits domiciled Cypriot shareholders. The abolition of rental SDC means rental income is now taxed only under income-tax rules plus GESY, removing a defence-contribution layer that had applied at 3% on 75% of gross rent.

Was deemed dividend distribution abolished?

Yes. Deemed dividend distribution (DDD) — the rule that treated a portion of undistributed profits as if paid out after two years and taxed them to SDC — was abolished for profits earned from 1 January 2026 onward.Special Defence Contribution Law N.117(I)/2002 (DDD provisions repealed for post-2026 profits)

This is one of the reform's quiet wins for owner-managed companies, which no longer face a phantom tax on profits they chose to retain and reinvest. The qualifier is the transition: undistributed profits from 2024 and 2025 remain within the old DDD machinery, which continues to operate up to 31 December 2027. So a company with legacy retained earnings must keep tracking the 70%-deemed-distribution calculation for that limited period, even though the rule is gone prospectively. Concealed or non-arm's-length transfers to shareholders are separately caught by a specific anti-avoidance SDC charge, so the abolition is not a licence to strip value informally.

What are the new personal income tax bands?

The tax-free threshold rose to €22,000 and every band above it widened, so the top 35% rate now bites only above €72,000.The revised progressive scale applies from 1 January 2026.Income Tax Law N.118(I)/2002 (personal bands), as amended by the 2026 tax reform

For inbound talent the incentives are intact: the 50% expat exemption continues for new residents earning above €55,000, for up to 17 years, layered on top of the wider bands. GESY health contributions remain at 2.65% for employees, capped on income up to €180,000. One compliance shift worth flagging: annual return filing is now expected of Cyprus residents from a lower income floor, and record-retention and filing deadlines tightened (see below).

Do the non-dom and expat rules still work?

Yes — and one condition was actually relaxed. The 60-day tax residency test survives unchanged, and the reform removed the awkward requirement that a 60-day resident not be tax resident in any other single state, making the rule easier to satisfy.Income Tax Law N.118(I)/2002, 60-day residency provisions, as amended 2026

The core 60-day residency route still requires no more than 183 days in any other state, at least 60 days in Cyprus, a Cyprus tie (business, employment or directorship), and a permanent home available in Cyprus. Non-domiciled status continues to give 0% SDC on worldwide dividends, interest and rents for 17 years, extendable in some cases. The reform introduced scope to prolong benefits with a contribution mechanism, but the specifics are technical and evolving, so confirm the current extension terms rather than relying on a headline figure. The practical takeaway: Cyprus remained a non-dom jurisdiction through the reform, and the loosened 60-day condition marginally widens the door.

How are crypto and capital gains taxed now?

Crypto disposals now attract a flat 8% charge under the new Article 20E, replacing the old case-by-case analysis; separately, the lifetime capital-gains exemptions on immovable property were substantially increased.Income Tax Law, Article 20E (crypto-asset taxation), effective 1 January 2026

Before 2026, a crypto gain might be tax-free (if genuinely capital in nature) or fully taxable as trading income, with the line often contested. The new Article 20E regimereplaces that uncertainty with a mandatory 8% rate on gains from disposals of crypto assets, and extends to certain share-based remuneration under approved employee schemes. The scope, timing and definition of a "disposal" are technical, so document acquisition cost and disposal proceeds for every transaction. On real estate, the capital gains tax rate on Cyprus immovable property is unchanged at 20%, but the lifetime exemptions rose — the general exemption and the primary-residence and agricultural-land reliefs were all increased, reducing the effective charge on a first or main-home sale.

What happened to stamp duty and filing rules?

The general stamp duty regime was largely abolished from 2026, though certain categories are treated differently, and a set of compliance rules — filing deadlines, record retention and audit thresholds — tightened at the same time. Because the stamp-duty carve-outs are nuanced, treat the abolition qualitatively and confirm whether a specific instrument still attracts duty before signing.Stamp Duty Law reform, effective 1 January 2026

On administration, the corporate and personal filing and payment deadlines were moved forward (broadly to 31 January of the relevant year), record-retention was extended to six years, the gross-income threshold above which individuals need audited accounts was raised, and general anti-avoidance and transfer-pricing enforcement were strengthened. Companies should also note a 5% withholding on dividends paid to entities in low-tax jurisdictions and a lower 20% threshold for classifying a company as "property-rich" for capital-gains purposes. These are the provisions most likely to catch owners off guard, precisely because they are procedural rather than headline rate changes.

What stayed the same?

Cyprus kept the pillars that make it attractive: no wealth, inheritance or gift tax; the non-dom SDC shelter; the IP Box; the 50% expat exemption; the dividend participation exemption; and the 183-day and 60-day residency routes. The reform sharpened the system rather than dismantling it.

• No wealth, inheritance, estate or gift tax — unchanged.
• Non-dom 0% SDC on dividends, interest and rents for 17 years — retained.
• IP Box effective rate around 2.5%–3% on qualifying income — retained (now on the 15% base).
• 50% expat exemption for salaries above €55,000 — retained.
• Dividend income of companies broadly exempt via the participation rules — retained.
• GESY at 2.65% for employees, capped at €180,000 — unchanged.