Cyprus Tax Reform 2026: Key changes for businesses and individuals

Effective from 1 January 2026, the new tax legislation introduces changes to corporate taxation, personal income tax, dividend taxation, and compliance, while preserving the key features that position Cyprus as a leading EU business jurisdiction.

This article provides an overview of the Cyprus tax reform 2026, outlining what has changed, what remains the same, and why the new framework matters for businesses, investors, and individuals.

The Cyprus tax reform 2026 modernises the tax system and aligns it with international standards, particularly OECD and EU initiatives, while addressing domestic economic and social priorities.

The reform focuses on:

• Alignment with global minimum tax requirements
• Personal taxation through higher tax‑free thresholds
• Simplification of dividend and shareholder taxation
• Tax administration and compliance mechanisms

Corporate tax changes

As of 2026, the standard Cyprus corporate income tax rate has increased from 12.5% to 15%. This change reflects Cyprus’ alignment with OECD Pillar Two rules and international tax developments.

Despite the increase, Cyprus continues to offer an attractive overall corporate tax environment relating to the retention of key exemptions and incentives such as the IP Box Regime and the Notional Interest Deduction Scheme (NID).

Abolition of Deemed Dividend Distribution (DDD)

One of the most business‑friendly changes in the Cyprus tax reform 2026 is the abolition of the Deemed Dividend Distribution rules for profits earned from 2026 onwards.

Companies are no longer required to distribute notional dividends on retained profits.

Instead:

• Profits may be retained indefinitely
• Dividends are taxed only when distributed

This abolition improves cash‑flow planning and investment flexibility for Cyprus companies.

Dividend tax reduced to 5%

For Cyprus tax‑resident and domiciled individuals, the dividend tax (Special Defence Contribution) has been reduced from 17% to 5%.

At the same time:

• SDC on rental income is abolished
• New rules apply to disguised dividends paid to individuals

Importantly, the Cyprus non‑domicile (non-dom) tax regime remains fully intact, meaning non‑dom individuals continue to enjoy 0% tax on dividends and interest.

Non-dom individuals – alternative taxation method after 17 years

After completing 17 years in Cyprus (ie becoming Cyprus tax domiciled), individuals can extend their status as a non-dom for another 5 years by paying a lump sum of €250,000. This can be extended twice (ie up to 10 years extension), and the lump sum is payable for each extension.

Cyprus crypto tax & share‑based remuneration

The reform introduces clarity in the following emerging areas:

• Cyprus crypto tax 2026: gains from the disposal of crypto‑assets are taxed at a flat 8% rate
  • Ability to offset losses from disposal against profits arising from crypto within the same years (no carry forward of losses)
  • Crypto obtained through mining is excluded from this regime and taxed under general income tax rules
• Approved employee stock option schemes are also taxed at 8%, subject to statutory conditions and limits

These rules provide certainty for fintech, investment, and technology‑driven businesses.

Additional business tax measures

Other notable Cyprus tax changes 2026 include:

• Extension of tax loss carry‑forward from 5 to 7 years
• Extension of the 20% R&D super‑deduction on qualifying expenses, allowing the total 120% deduction from taxable income, to 2030
• Increased thresholds for transfer pricing documentation
• Abolition of stamp duty on most transactions

Personal tax changes

Under the Cyprus personal tax reform, the tax‑free threshold increases to €22,000, with following revised income tax bands:

Family, housing and green incentives - new deductions introduced:

• Dependent children and students (subject to income limits),
• Mortgage interest or rent for primary residence,
• Green upgrades and energy efficiency investments,
• Home insurance against natural disasters.

What has remained the same under the new system:

• Cyprus non‑dom regime
• Participation exemption for holding companies
• Cyprus IP Box regime (up to 80% exemption on Qualifying Profits)
• Notional Interest Deduction (NID) (up to 80% exemption on Total Taxable Income)
• No capital gains tax on gains arising from the disposal of securities
• Existing residency rules (60‑day and 183‑day tests)

These elements ensure continuity and certainty for international structures and long‑term investment planning.

What the Cyprus Tax Reform 2026 means in practice

Although the headline corporate tax rate has increased, the Cyprus tax reform 2026 introduces meaningful simplifications to profit distribution, dividend taxation, and the overall tax framework, supporting clearer and more efficient planning.

Contact us to discover how we can help you establish your Cyprus business.