Tag: registrar of companies

Cyprus tax reform 2026: A major step forward

As of January 2026, Cyprus enters a new era of taxation. The country’s most extensive reform in decades updates personal and corporate tax rules, introduces targeted incentives, and strengthens compliance measures.

Designed to create a more flexible and fair system for households and families; while fostering investment and economic growth, the reform also enhances tax administration and transparency. The key changes are outlined below.

Income Tax Law

• The corporate tax rate increases from 12.5% to 15%.

• Tax loss carryforward period is extended from 5 to 7 years.

• Higher tax-free threshold and new tax rates for individuals: The tax-free amount rises from €19,500 to €22,000. The new rates are the following:
  • 0% up to €22,000
  • 20% from €22,001–€32,000
  • 25% from €32,001–€42,000
  • 30% from €42,001–€72,000
  • 35% over €72,000

A beneficial update to the previous brackets which have been around since 2008.

• Additional deductions for family and household support: Families or single persons may be eligible to claim deductions depending on the number of children (subject to income criteria). Dependent children include students up to the age of 24. The deductions are as follows:
  • 1st child: €1,000
  • 2nd child: €1,250
  • 3rd child or more: €1,500

Additional deductions include: up to €2,000 for housing loan interest or rent and up to €1,000 for green initiatives (subject to income criteria). Also, up to €500 for home insurance against natural disasters.

• Tax residency under the 60-day rule is simplified as the condition not to be tax resident in another country is removed.

• Tax deductions now include premiums for permanent or partial incapacity insurance, alongside life insurance.

• Employee share options schemes: The benefit will be subject to income tax at the rate of 8% in the year of vesting (subject to restrictions).

• Ex-gratia payments at the start or termination of employment are tax-free up to €200,000; amounts above that are taxed at 20%.

• The cap on deductible entertainment expenses rises from €17,086 to €30,000.

• Additional deduction for R&D expenses: the 20% super-deduction for qualifying IP-related R&D expenditure on intangible assets is extended until 2030.

• Intangible asset amortization: Intangibles with an indefinite useful life will be amortized over a period of 20 years.

• IP box regime remains very attractive with an effective tax rate on royalty income as low as 3%.

• Redemption of units in funds: From 1 January 2031, net amounts derived from the redemption of fund units will be treated as dividends rather than profits from disposal of titles and taxed accordingly.

• Corporate tax residency by incorporation: The requirement for a company not to be tax resident in another state in order to be treated as Cyprus tax resident has been removed (unless a double tax treaty provides otherwise).

• Tax deductibility of interest expense:
  • Interest incurred on loans for the acquisition of shares in a directly or indirectly wholly owned subsidiary is not tax deductible if the subsidiary is resident in a non-cooperative jurisdiction or it is registered in such jurisdiction and it is not tax resident in any other jurisdiction.
  • The restriction on deductibility of interest incurred for the acquisition of non-business assets (excluding private motor vehicles) continues beyond seven years.

• Crypto Assets: Gains from transactions with crypto assets are taxed at the flat rate of 8%, with losses offset against gains in the same year, with no carry forward provisions.

• Amendment of thresholds for transactions with related parties:
  The thresholds for Local File obligations have been revised as follows:
  − Transactions in goods: Transactions that exceed cumulatively the amount of €5.000.000;
  − Financing Transactions: Transactions that exceed cumulatively the amount of €10.000.000;
  − All other categories of transactions: Transactions that exceed cumulatively per category of transactions the amount of €2.500.000.

Special Contribution to the Defence Tax (SDC) Law

• SDC on dividends and interest for domiciled shareholders is reduced from 17% to 5% for profits earned from 1 January 2026 onwards.

• Special Defence Contribution (SDC) on rental income is abolished

• Deemed Dividend Distribution (DDD) is abolished on post-2026 profits.

• Interest income received by Cyprus tax resident companies is no longer taxed under SDC. Exceptions apply for certain companies established for religious, charitable purposes or the promotion of art, science or sports.

• Redemption of units in funds will be treated as a capital reduction and not sale of titles from 1 January 2031.

• The non-dom regime becomes more flexible, allowing individuals who have completed 17 years of Cyprus tax residency to extend their non-dom status for up to two additional five-year periods, subject to the payment of a €250,000 lump sum per period.

• Payment of SDC on foreign dividend and interest is made in one instalment payable upon submission of the income tax return.

• Introduction of anti-abuse provisions for SDC purposes.

Assessment and Collection of Taxes Law

• The deadline for the submission of annual income tax returns for companies and individuals who have obligation to prepare audited financial statements will be 13 months following the end of the tax year.

• Payment of the tax balance must be made by the due date for the submission of the tax return.

• The income threshold requiring audited accounts rises from €70,000 to €120,000.

• All residents aged between 25 – 71 must submit a tax return, even if no tax is due.

• Rent payments must be made via bank transfer, credit card or other method of electronic payment.

• Provisions are introduced to enable the Tax Department to enforce tax collection and combat tax avoidance. The Tax Commissioner has stronger powers, including the ability to freeze company shares where tax debts exceed €100,000 and seal non-compliant businesses, while reporting requirements are strengthened to improve transparency.

Stamp duty Law

• Stamp duty is fully abolished on any contracts executed on or after January 1, 2026.

Property and capital gains

• The definition of property is amended to include shares in companies that own, directly or indirectly, shares in other companies that derive 20% (rather than 50% as previously required) or more of the market value from such immovable property.

• The tax-exempt amounts for disposal of immovable property are increased to reflect current property values.

• The exemption for the sale of shares listed on a “recognized” stock exchange has been replaced with an exemption for sale of shares listed on a “regulated” market of a recognized stock exchange. Transitional provisions are introduced for disposal of shares listed on a recognized stock exchange that were acquired before this amendment.

• An exemption is introduced for gains from disposal of shares listed on a non-regulated market, provided profits do not exceed €50,000 per annum.

• It is clarified that the exchange of property with a land developer (under certain conditions) is considered “exchange of property,” and thus not considered a disposal for CGT purposes.

Looking ahead

The Cyprus Tax Reform 2026 represents a landmark step in the evolution of the country’s financial landscape. By creating a more transparent, efficient, and strategically aligned framework, it delivers tangible benefits for households, businesses, and investors. Beyond these immediate improvements, the reform reinforces Cyprus’s position as a competitive, credible, forward-looking jurisdiction, paving the way for sustainable growth and long-term stability.

For tailored guidance and to make the most of these changes, contact us for expert tax advisory support.