We would like to inform you that, according to the latest official announcement issued by the Cyprus Tax Department and pursuant to Article 48A of the Assessment and Collection of Taxes Law (Law 4/1978), as amended following the recent tax reform, all rent payments relating to immovable property situated in Cyprus must, with effect from 1 July 2026, be made exclusively through one of the following payment methods:

• Bank transfer;
• Debit or credit card payment; or
• Any other recognised electronic means of payment.

This requirement applies to all natural and legal persons, irrespective of the amount of rent payable or the nature of the property’s use. Accordingly, recipients of rental income derived from immovable property located in Cyprus are prohibited from accepting rent payments in cash or through any other non-electronic means and must ensure compliance with the prescribed payment methods.

The era in which digital assets operated with limited regulatory oversight is rapidly coming to an end. The introduction of DAC8 and the Crypto-Asset Reporting Framework (CARF) marks a significant regulatory shift for both financial institutions and Crypto-Asset Service Providers (CASPs). These frameworks are set to redefine reporting obligations by placing greater emphasis on data accuracy, traceability, and cross-border exchange of information, driving the industry toward enhanced tax transparency.

The 8th amendment to the EU Directive on Administrative Cooperation (“DAC8”) expands on existing tax transparency frameworks, such as CRS, to encompass crypto-assets. Closely aligned with the OECD’s Crypto-Asset Reporting Framework (CARF), DAC8 establishes a standardized mechanism for the cross-border exchange of information relating to crypto-asset transactions between participating jurisdictions.

With the new rules already effective from January 1 2026, the focus is no longer on whether firms must comply, but on how effectively and efficiently they can do so. While these reporting requirements may appear complex and operationally demanding, they should not become an obstacle to your firm’s growth and strategic objectives.

Finmatek is pleased to announce the launch of its DAC8/CARF reporting services, designed to support clients throughout every stage of the compliance process.

Our services include:

• Data classification and mapping
• End-to-end reporting solutions
• Ongoing advisory and regulatory monitoring

Our cross-functional team combines deep expertise in regulatory reporting and digital asset compliance, enabling us to deliver timely, accurate, and fully compliant reporting solutions tailored to your needs.

Cyprus Tax Residency

An individual is considered a Cyprus tax resident if they meet either of the following:

• 183-day rule: If an individual is physically present in Cyprus for more than 183 days in a tax year, he will be considered a tax resident of Cyprus in that tax year.
• 60-day rule: If an individual who does not stay in another country for one or more periods exceeding in aggregate 183 days in the same tax year is deemed as a resident in Cyprus in that tax year, if all of the following conditions are met:

1. the individual stays in Cyprus for at least 60 days in the tax year
2. do not stay in another State for over 183 days
3. exercises a business in Cyprus and/or is employed in Cyprus and/or holds an office in a Cyprus tax resident company at any time during the tax year
4. maintains (by owning or leasing) a permanent home in Cyprus

Non-Domicile (Non-Dom) Status

Individuals who are tax residents in Cyprus but do not have a Cyprus domicile, are exempt from Special Defence Contribution (SDC) tax on:

• Dividends
• Interest

In essence, an individual who relocates their tax residency to Cyprus may benefit from a significant tax advantage of the exemption from Special Defence Contribution (SDC) on dividend and interest income for a period of up to 17 years, subject to meeting the applicable non-domicile conditions.

Dividends and interest received is subject 2,65% General Healthcare System Contributions (GESY, GHS), which is payable also by persons benefiting from the Cyprus Non-Dom Tax Status.

Any income which is subject to GHS is capped at €180.000 per year, resulting in a maximum annual amount of contribution of €4.770, i.e. annual dividends and interest received above the threshold is not subject to the contribution.

Tax Exemption for Employment Income

An individual can benefit from exemption on his/her gross employment income, either 20% or 50% upon relocation to Cyprus, subject to meeting the applicable conditions.

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.

We would like to inform you of significant changes to the European Union’s VAT regime, which have now come into effect. The new rules are designed to substantially reduce administrative burdens and support the cross-border growth of small businesses within the single market.

What is Changing?

Until now, small businesses could only benefit from a VAT exemption in the Member State in which they were established. Under the new scheme, eligible SMEs may also benefit from VAT exemptions in other EU Member States where they conduct business, even if they do not have a permanent establishment in those jurisdictions.

Eligibility Criteria

To qualify for the new scheme, a business must meet all of the following criteria:

• Total Annual EU Turnover: Must not exceed €100,000
• Domestic Turnover: Must not exceed the national exemption threshold of the Member State where the exemption is requested (up to €85,000, depending on the country)

Key Benefits and Simplifications

The reform introduces several important advantages for businesses:

• Single Registration: Applications for VAT exemptions in other Member States can be submitted through a single procedure in the country of establishment
• Reduced Administrative Burden: Businesses may submit a single quarterly report and issue simplified invoices
• No VAT Charges: Eligible businesses can supply goods and services without charging VAT, enhancing their competitiveness

Support Tools

The European Commission has launched an official platform providing guidance, information, and practical tools to support the implementation of the Special VAT Scheme for SMEs across the EU ( https://sme-vat-rules.ec.europa.eu/index_en )

For further information or assistance, please do not hesitate to contact us.

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.

The Cyprus Intellectual Property (IP) regime provides for an 80% exemption on qualifying profits derived from the use of qualifying intangible assets, resulting in an effective taxation of only 20% of such income. In practical terms, this may reduce the effective tax rate to as low as 3% on eligible IP-related profits.

Cyprus has implemented Action 5 of the OECD Base Erosion and Profit Shifting (BEPS) initiative, which introduces the “modified nexus approach”. This requires a direct link between the income generated from intellectual property rights and the qualifying expenditure and activities undertaken by the taxpayer contributing to that income.

Qualifying assets under the Cyprus IP Box Regime

“Qualifying intangible asset” means an asset that was acquired, developed or used by a person for the carrying on of the business and that constitutes intellectual property excluding intellectual property that relates to marketing and that is the result of activities of research and development and includes intangible asset for which there is only economic ownership.

Qualifying intangible assets include:

• Patents as these are defined in accordance with the provision of the Patent Law,
• Computer software programs;
• Other intangible assets which are legally protected and fall under the provisions of (a) or (b) below:

1. utility models, intellectual property assets which provide protection to plants and genetic material, orphan drug designations and extensions of protections of patents
2. that are non-obvious, useful, and novel, where the person which utilizes them for the carrying on of the business does not generate annual gross income exceeding Euro 7.500.000 per annum from all intangible assets and in the case of a group of such persons, the group does not generate annual gross income exceeding Euro 50.000.000 on a worldwide basis, using an average of 5 years for both calculations of the aforementioned amounts, but they are not tradenames (including brands), trademarks, image rights and other intellectual property rights used to market products and services.

The Nexus Approach

The Nexus Approach is used to determine the amount of qualifying profits that will give the relevant deduction to the taxpayer.

Qualifying profit (QP) is defined as the proportion of the overall income (OI) derived from the qualifying asset, corresponding to the fraction of the qualifying expenditure (QE) plus the uplift expenditure (UE) over the overall expenditure (OE) incurred for the qualifying intangible asset.

Overall Income (OI)

Overall income is defined as the gross income earned from qualifying intangible assets during the tax year, minus any direct costs incurred for generating the income.

On calculating overall income, direct costs include as follows:

• All direct or indirect costs incurred in earning the income from the qualifying asset
• The amortization of the cost of the assets
• Notional interest in equity contributed to finance the development of the asset

Qualifying Expenditure (QE)

Qualifying expenditure for a qualifying intangible asset is the sum of all research and development (R&D) expenditure that took place during any tax year wholly and exclusively for the development, improvement or creation of the qualifying intangible asset and that relate directly to the qualifying intangible asset.

Qualifying expenditure includes, but is not limited to, the following:

1. wages and salaries
2. direct costs

• general expenses relating to installations used for research and development;

1. expenses for commissions related to R&D activities
2. expenses associated with R&D that have been outsourced to non-related persons

Uplift Expenditure (UE)

An uplift expenditure, which will be equal to the lower of:

• 30% of the qualifying expenditure
• Total cost of acquisition of the qualifying intangible assets, plus the cost of outsourcing to related parties of any R&D activities in relation to such assets

Overall Expenditure

Overall expenditure relating to qualified intangible assets is defined as the sum of:

• Qualifying expenditure and
• Total amount of acquisition cost and cost of outsourcing of research and development activities to related parties, in relation to qualifying intangible asset, that was incurred in any tax year.

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.

The UAE Ministry of Finance has issued the Electronic Invoicing Guidelines on 23 February 2026 setting out the framework for the upcoming nationwide e-invoicing system. This initiative forms part of the UAE’s broader digital tax transformation strategy.

Under the new rules, invoices will need to be issued and exchanged in a structured electronic format (XML) through accredited service providers, enabling real-time validation and reporting to the Federal Tax Authority. Traditional invoice formats such as PDFs or paper documents will no longer be sufficient for compliance purposes.

The system will be introduced in phases, beginning with a pilot stage in 2026, followed by gradual mandatory implementation in subsequent years. It will apply to most Business to Business and Business to Government transactions involving UAE-established and certain non-resident businesses.

Key requirements include the use of approved service providers, compliance with the UAE-specific invoice data format, and readiness for real-time digital reporting.

Businesses are strongly advised to start assessing their invoicing systems, ERP capabilities, and internal processes to ensure readiness for the transition.

For more details please follow the link below:

https://mof.gov.ae/wp-content/uploads/2026/02/UAE-Electronic-Invoicing-Guidelines_V-1.0-23Feb2026.pdf

For further information or assistance in assessing how these changes may impact your business, please do not hesitate to contact us.

We would like to inform you of important updates to the Value Added Tax (VAT) framework in the United Arab Emirates, which came into effect on 1 January 2026. These changes, introduced by the UAE authorities (https://tax.gov.ae/en/taxes/Vat.aspx), aim to enhance compliance, strengthen enforcement, and accelerate the transition toward a more digital tax environment.

Overview of Key Changes

The 2026 VAT updates introduce several targeted amendments affecting compliance, documentation, and financial exposure for businesses:

1. Introduction of a Five-Year Deadline for VAT Refund Claims
   Businesses must now claim or utilize excess VAT credits within five years from the end of the relevant tax period. Any unclaimed amounts after this period will lapse, creating potential financial exposure.
2. Changes to the Reverse Charge Mechanism (RCM)
   The requirement for businesses to issue self-invoices under the reverse charge mechanism has been removed, reducing administrative burden. However, businesses must still maintain sufficient supporting documentation for audit purposes.
3. New Penalty Framework
   Late payment penalties have been replaced with an interest-based system, currently set at 14% per annum and calculated monthly. This approach increases the cost of prolonged non-compliance while encouraging timely settlement.
4. Stricter Input VAT Recovery Rules
   Authorities now have the power to deny input VAT recovery where transactions are linked to tax evasion, even if the invoice appears valid. Businesses are expected to exercise increased due diligence when dealing with suppliers.
5. E-Invoicing Framework Introduction
   A national e-invoicing system will be introduced, with a pilot phase beginning in 2026 and mandatory implementation for large taxpayers from 2027. This marks a significant step toward real-time digital tax reporting.
6. Sector-Specific and Administrative Updates
   Additional clarifications have been introduced in areas such as scrap metal transactions (now subject to reverse charge), virtual assets (with many transactions treated as VAT-exempt), and digital VAT registration certificates.

What Remains Unchanged
Despite these updates, certain core elements of the UAE VAT system remain the same:

• The standard VAT rate remains at 5%.
• The mandatory registration threshold remains AED 375,000.
• Filing deadlines and reporting periods are unchanged.

Businesses are advised to review their VAT processes, ensure proper documentation, and assess their readiness for upcoming digital compliance requirements.

For further information or assistance in assessing how these changes may impact your business, please do not hesitate to contact us.