We would like to inform you that on 22 December 2025, the Cyprus House of Representatives enacted six amending tax laws as part of the wider Cyprus Tax Reform initiative.

Most of the changes will become effective from 1 January 2026 and impact both companies and individuals. Below is a high-level summary of the key provisions:

Income Tax

• Increase of the Corporate Income Tax (CIT) rate from 12.5% to 15%
• Increase of the individual tax-free threshold from €19,500 to €22,000

        Tax rate – Taxable income
        0%: from €0 to €22,000
        20%: from €22,001 to €32,000
        25%: from €32,001 to €42,000
        30%: from €42,001 to €72,000
        35%: €72,001 and above

• New personal income tax deductions (dependent children, main residence costs, energy efficiency, electric vehicles, etc.)
• Extension of tax loss carry-forward from 5 to 7 years
• Introduction of flat 8% taxation on share option schemes (subject to conditions) and cryptocurrencies
• Introduction of a 20% super-deduction for Research & Development (R&D) expenses for the period 2025–2030
• Increase of allowable entertainment expenses to €30,000

Special Defence Contribution (SDC)

• Reduction of SDC on dividends for Cyprus tax resident domiciled individuals from 17% to 5%
• Abolition of SDC on rental income
• Abolition of Deemed Dividend Distribution for profits generated from 2026 and onwards

Capital Gains Tax

• Expansion of the definition of companies owning immovable property in Cyprus (threshold reduced from 50% to 20%)
• Increased tax exemptions on disposal of main residence and other immovable property

Other Key Changes

• Abolition of Stamp Duty
• Mandatory income tax return filing for Cyprus tax residents aged 25–71, regardless of income
• Rent payments permitted only via electronic means (no cash payments)
• Increased penalties and fines for non-compliance
• Enhanced enforcement powers granted to the Commissioner of Taxation