Article 20E of The Income Tax Law of 2002 (118(I)/2002) – Taxation of profits from crypto asset transactions
The recent Cyprus tax reform effective since the 1st of January 2026 has introduced a special mode of taxation for crypto assets. Profits of any person (physical or legal) arising from the disposal of crypto currencies are subject to taxation at a rate of 8%.
Crypto Asset
The term “crypto asset” is defined according to the Regulation (EU) 2023/1114 (“MiCAR”) as a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology.
The three main categories of crypto assets that fall within MiCAR’s scope based on their characteristics are:
- E-Money Tokens (“EMT”) which are regulated under Title IV of MICAR and demonstrate similarities in terms of economic function and regulation, with electronic money. An EMT is a crypto asset that purports to maintain a stable value by referencing the value of one official currency such as the USD and the Euro. Examples of these are USDC (Circle) and USDT (Tether).
- Asset Referenced Tokens (“ART”), which is a regulatory category corresponding to the so-called ‘stablecoins’ and that are regulated under Title III of MiCAR. An ART is a crypto asset that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies such as currencies and commodities or another crypto currency. Examples of these are Pax Gold (PAXG) and Tether Gold (XAUT).
- Crypto assets other than ARTs and EMTs which are regulated under Title II of MiCAR, hence forming a residual category i.e. a “catch-all” category. Examples of these are Bitcoin and Ethereum.
Disposal
The term “disposal of crypto currencies” means:
- The sale of crypto currencies
- The donation of crypto currencies
- The exchange of one crypto currency for another crypto currency; and
- The use of crypto currency as a means of payment.
The term “disposal” does not apply in the case of disposal of crypto currencies, which were acquired through the conduct of mining activity and any profits that do not fall within Article 20E are taxed under the general provisions of the Income Tax Law.
Losses
Losses arising from the disposal of crypto currencies may be offset against profits from crypto currencies disposals within the same tax year. Such losses cannot be carried forward to future years, nor can they be surrendered to other group companies for group relief.
