On 22 December 2025, following an extensive public consultation process, the House of Representatives enacted the legislative provisions comprising the Cyprus Tax Reform. The reform introduces amendments, all of which were published in the Official Gazette on 31 December 2025. These amending laws relate to:

• The Income Tax Law of 2002 (118(I)/2002)
• The Special Contribution for the Defence Law of 2002 (117(I)/2002)
• The Capital Gains Tax Law of 1980 (52/1980)
• The Assessment and Collection of Taxes Law of 1978 (4/1978)
• The Collection of Taxes Law of 1962
• The Stamp Duty Law of 1963

The new legislative framework is applicable for tax years commencing 1 January 2026 and onwards.

Income Tax Individuals

Employment and business income received, as well as rental income, are subject to taxation at the below applicable rates.

Mandatory submission of the annual Income Tax Return by individuals aged over 25, irrespective of whether their income exceeds the applicable personal tax thresholds.

Voluntary Retirement Payments: Lump-sum payments of up to €200,000 are exempt from income tax (previously €20,000), with any amount in excess thereof subject to taxation at a rate of 20%.

Special Pension Regime: The tax-exempt threshold has been increased to €5,000 (from €3,420), with any amount in excess thereof subject to taxation at a rate of 5%.

Several family income allowances have been introduced, subject to meeting the applicable conditions.

Income Tax Companies

Corporate Income Tax: The corporate income tax rate has been increased from 12.5% to 15%.

Deemed Dividend Distribution (DDD): The DDD provisions have been abolished in respect of profits generated on or after 1 January 2026.

Dividend Taxation: The Special Defence Contribution (SDC) on actual dividend distributions has been reduced from 17% to 5% for dividends paid to individuals who are both tax resident and domiciled in Cyprus.

Withholding Taxes (WHT) on Dividends:

• A withholding tax at the rate of 5% has been introduced on dividends paid to companies’ residents in jurisdictions classified as low tax.
• A withholding tax at the rate of 17% applies to dividends paid to entities resident in jurisdictions included on the EU list of non-cooperative (blacklisted) jurisdictions.

Entertainment Expenses: The deductible limit for entertainment expenses has been increased to €30,000 (previously €17,086).

Loss Carry-Forward: The period for the carry-forward of tax losses has been extended from five (5) years to seven (7) years.

Capital Gain Tax

The general exemption has been increased from €17,086 to €30,000. The exemption applicable to agricultural land has been increased from €25,629 to €50,000, while the exemption for the disposal of a primary residence has been increased from €85,430 to €150,000

General And Administrative Changes

Cryptocurrency-Related Income: A new tax at a rate of 8% has been introduced on income derived from crypto-related activities.

Stamp Duty: Stamp duty has been abolished, subject to the detailed provisions set out in the amending Stamp Duty Law.

Corporate Tax Compliance Deadlines: The deadline for the submission of corporate income tax returns has been extended to 31 January of the second year following the relevant tax year. This deadline will also apply to the payment of corporate income tax.

Special Defence Contribution (SDC) on Rental Income: The SDC imposed on rental income has been abolished.

How can we help

At FINCAP Advisers Ltd, our dedicated tax team offers comprehensive services, including:

• Corporate and international tax advisory
• Personal tax planning and compliance

We combine technical expertise with practical solutions to help clients navigate the evolving tax landscape efficiently and confidently.

Should you like to further discuss the content and potential impact of the above to your business, please contact our trusted advisors from the Tax Department.