On 31   December 2025, Cyprus enacted significant tax reform measures aimed at stimulating economic growth and enhancing tax compliance, with most  changes effective from 1 January 2026.

In   brief the main amendments of the Tax Reform Package are summarized below.

For the Greek version you may also refer to the detailed outline of all tax   reform measures published in the Official Gazette of the Republic of Cyprus Νομοθεσία- Αλλαγές (pages 1-71).

 INCOME TAX LAW

  • CIT rate: The corporate income tax (CIT) rate is increased from 12,5% to 15%;
  • Tax losses: The carry forward of tax losses is extended from 5 to 7 years;
  • Passive interest income for Companies will only be subject to Income Tax will no longer be subject to Defence Tax on passive interest income;
  • Tax treatment of ex-gratia payments:Introduction of provisions for the taxation for payments above €200.000 with a fixed rate of 20%, for payments on retirement including early        retirement, payments on termination of employment or appointments,golden handshake payments, compensations for termination of employment or appointment;
  • Additional R&D Deduction: Businesses will get a 20% “super tax deduction” for scientific research and R&D expenses incurred from 2025 through 2030;
  • Income Tax bands: The tax-free band for individuals is raised from €19.500  to €22.000;

€22.001-€32.000   – 20%

€32.001-€42.000   -25%

€42.001-€72.000   – 30%

€72001   and above – 35%

  • New income tax deductions for individuals. Subject to Income level for individuals who incur costs in relation to:

Dependent children /university students( €1.000-€3.750)

Interest on loans used for acquisition of main residence or rent for main residence (€2.000)

Insurance payment against natural disasters on residence (up to €500)

Expenses for energy efficiency(€1.000)

Acquisition of electric car(€1.000)

  • Entertainment expenses: The amount of entertainment expenses allowed as tax deductible, increases to €30.000;
  • Increase of Transfer Pricing local file thresholds (Goods : €5m, Financial transactions: €10m , Other transactions :€2.5m)
  • Crypto taxation: Introduction of provisions for the taxation of crypto currencies at a flat rate of 8%.

 STAMP DUTY LAW

        Abolished from 1/1/2026.

 SPECIAL CONTRIBUTIONS FOR THE DEFENCE (SDC) TAX LAW

  • Reduction of SDC rate applicable on dividends earned by Cyprus tax residents Cyprus domiciled individuals % from 17% to 5%;
  • The Deemed Dividend Distribution provisions on corporate profits earned after 1 January 2026 are abolished;
  • Rental income is exempt from SDC (only subject to IT);
  • Dividends paid to Cyprus tax residents Cyprus domiciled individuals paid out of corporate profits earned up to 31 December 2025 will be taxed with an SDC rate of 17%;
  • Withholdings tax on dividends paid to low taxed jurisdictions is reduced to 5% while it remains at 17% for dividends paid to blacklisted jurisdictions. 

 CAPITAL GAINS TAX LAW

  • The definition of shares that directly or indirectly own immovable property has been amended to include shares  which derive 20% (currently 50%) of their value from immovable property  situated in Cyprus;
  • The tax-exempt amounts for disposal of immovable property, agricultural land and main residence have been increased (for a natural person has increased to EUR 30k from EUR 17.086,Primary residence exemption has increased to €150k from € 85.430, Agricultural land exemption has increased to €50k from €25.629);
  • No CGT is imposed on the sale of shares listed on a non-regulated stock exchange if the disposal  amount does not exceed €50k in a tax year. If the disposal amount exceeds €50k in a tax year, CGT will be imposed accordingly.

 COLLECTION OF TAXES LAW

  • Powers given to the Commissioner of Taxation to pledge shares owned by a taxpayer who owes taxes exceeding  €100.000.

 ASSESSMENT AND COLLECTION OF TAXES LAW

  • All tax resident individuals from the age of 25 to the age of 71 have an obligation to file a personal income tax return irrespective of whether they have income or not while all Cyprus  tax resident individuals who have income will have an obligation to file a return irrespective of their age;
  • The deadline of submission of tax returns by companies and individuals who prepare audited accounts has been set on 31/1 of the year that follows the subsequent year to the tax year (i.e. 13 months from the tax year end). The deadline for the payment of the tax is aligned with the tax return submission deadline (i.e on 31/1);
  • The deadline to submit an objection is  extended to 60 days;
  • The threshold for annual income for individuals to have an obligation to prepare audited accounts is increased from €70.000 to €120.000;
  • Several provisions are introduced to enable the tax authorities to enforce tax collection and combat tax avoidance by having  stronger audit and collection powers and to impose increased administrative penalties;
  • Obligation of rental payments to be made  electronically;
  • A director will continue to be liable for actions or omissions that have taken place during his/her term despite that at the time proceedings will commence he/she has already resigned;
  • Penalties and fines have increased;

Our Tax Department at PEK Ltd remains at your disposal for any assistance required to ensure that all taxpayers comply with the new requirements.