On the 22/12/2025 the Cyprus parliament voted a major package of Tax Laws aiming to maintain the competitiveness of Cyprus as an international business hub.
As from the 01st of January 2026 the following important amendments will be applicable:
Corporate
- Corporation tax has increased from 12.5% to 15% aligning with OECD global minimum tax rules for multinationals
- Special defense tax (SDC) on dividends has decreased from 17% to 5%
- SDC on rental income is abolished
- SDC on Deemed dividend distributions on profits earned after 2026 has been abolished
- Stamp duties tax is abolished except for real estate, banking and insurance contracts
- A flat 8% tax applies to cryptocurrency gains and approved stock options
- Loss carry-forward extended from 5 to 7 years
- R&D super-deduction (120%) extended to 2030
- Entertainment expenses deduction cap increased to €30,000 (from €17,086)
Personal
- Income tax, tax free threshold has increased from Eur19.500 to 22.500
New personal income tax brackets:
- 20% on €22,501–€32,000
- 25% on €32,001–€42,000
- 30% on €42,001–€72,000
- 35% on €72,001+
Personal income tax reliefs introduced
A. Child/student deductions (up to age 24) + income caps
Per child/student deduction (up to age 24):
- €1,000 for the 1st
- €1,250 for the 2nd
- €1,500 for the 3rd and each additional
Eligibility via household income ceilings (as reported):
- ≤€100,000 for 1–2 children
- ≤€150,000 for 3–4 children
- ≤€200,000 for 5+ children
B. Housing, rent, “green”, and resilience deductions
Reported new deductions/allowances include:
- Up to €2,000 deductions for loan interest and rent.
- €1,000 for green home investments, explicitly including electric vehicle purchases
- Up to €500 for home insurance against natural disasters.
C. Severance payments: 20% tax, with a €200,000 tax-free allowance when paid due to employment termination
D. Capital gains tax free thresholds increased
Anti-evasion and compliance powers (administration & enforcement)
A. Mandatory filings / reporting scope
- All individuals aged 25+ must file tax returns
B. Electronic payments for rent
- Rent payments exceeding €500 must be processed electronically (reported effective 1 July 2026)
C. Expanded investigatory/enforcement powers
Reported new powers include:
- Tax Commissioner may request six-year asset/liability statements
- Ability to demand banking records from Cyprus-based banks
- Authority to seal businesses for non-compliance (non-filing, not issuing receipts, not settling debts), with a right to challenge in court
- Share freeze for tax debts exceeding €100,000
