Cyprus 2026 Tax Reform: Complete Overview - Waiting To Be Approved By Parliament Making Cyprus More Attractive And Efficient

The Cyprus government has introduced a wide-ranging tax reform, with key provisions taking effect from 1 January 2026. The reform covers personal income, corporate tax, capital gains, crypto-assets, special defense contributions (SDC), and enforcement measures, aiming to modernize the tax system, broaden the tax base, and strengthen compliance.

This tax reform is been presented to the parliament for voting. At the time of publishing this article the tax reform has not been approved yet by the parliament.

We consider the key changes of the bill to be the following:

• Increase of Corporate tax to 15% from 12.5%,
• Cancellation of deemed dividend tax,
• Reduction of dividend tax to 5% from 17%,
• The introduction of a flat 8% tax on cryptocurrency profits,
• Revisions of the capital gains tax regime, covering property swaps which are now tax free from 20%,
• Increase of personal tax-free thresholds for salary income subject to conditions and income thresholds
• New powers vested to the Income Tax Commissionaire with regards the collection of taxes due.
• The powers of the Tax Department are strengthened to request tax information regardless of banking or professional confidentiality.

INDEX

1. Personal Income Tax
2. Corporate Tax
3. Crypto Currency Tax
4. Special Defence Contribution
5. Capital Gains Tax
6. Summarised Personal & Corporate Taxes
7. Enforcement and compliance measures
8. Key dates and commencement
9. Summary

1. Personal Income Tax

We summarise below the revised tax scales for salaries calculation of Pay As You Earn (PAYE).

Allowances and Deductions

• Family-based allowances:

For the purposes of calculating the taxable income of an individual who is a resident of the Republic, the following allowances shall be granted, provided that the family income does not exceed €80,000, or €100,000 in the case where the dependent children, including dependent children who are students, are more than three (3), or €40,000 in the case of a single individual.

• Dependent children allowance: €1,000 per child (€2,000 for single-parent families).
• Student allowance: €1,000 per dependent student.
• Mortgage/rent interest: up to €1,500 for primary residence.
• Energy upgrades or new electric vehicle purchase: up to €1,000.
• Insurance premiums: permanent/partial disability and housing insurance up to €500.
• Capital expenditure deduction: For expenses 2025–2030, including capital expenditures under paragraph (l), an additional 20% deduction is allowed; may be waived in part or in full.

Conditions for Allowances

• Tax returns for spouses, civil partners, or single individuals must be filed on time.
• Consent required for mutual disclosure of tax information between spouses or civil partners.
• Definitions:
  • Dependent children, single-parent family, family income, student — per Child Benefit Law.
  • Single individual — lives alone, not married or in civil partnership, not cohabiting with adults or dependents.
  • Civil partners — as per Civil Partnership Law.

Other Provisions Affecting Individuals

Employee Bonuses and Gifts

Income exceeding €200,000 under specific subparagraphs of Article 5 is taxed at 20%.

Sole Traders

The threshold for mandatory submission of audited accounts by an individual increases from €70,000 to €120,000 of gross income.

Various Amendments

• Provisions for serving notifications to taxpayers are modernized, ensuring delivery by secure methods.
• The deadline for submission of corporate tax returns is moved to January 31 of the second year following the tax year, and this date will also apply for the payment of corporate tax.
• Submission of tax returns becomes mandatory for all individuals who are residents of the Republic aged 25 and above, regardless of whether they have taxable income, in order to broaden the tax base and increase tax revenue.
• Mandatory submission of tax returns is introduced for cooperatives.
• In the case of a cooperative that is an investment fund, the tax return must be submitted by the fund manager.
• The deadline for filing appeals to the Tax Commissioner is extended to 60 days.
• The Tax Commissioner is granted the authority to request a statement of assets and liabilities covering a period of eight (8) years, and taxpayers are required to keep supporting documents for their tax returns for eight (8) years after the actual submission date.
• Employers are obliged to submit employee declarations for all employees, regardless of income level.
• The powers of the Tax Department are strengthened to request tax information regardless of banking or professional confidentiality.
• The law introduces the ability to suspend business operations and seal business premises after a relevant decision by the Tax Commissioner, following three prior written warnings, in cases where a person operating the business repeatedly violates tax obligations, fails to issue or issues incorrect invoices/receipts, or obstructs a tax audit.
• Administrative fines and monetary penalties are amended to encourage voluntary compliance.

2. Corporate Tax

The introduction of a Flat 15% corporate tax on taxable income from 12.5% that applies to all companies established or registered in Cyprus, effective 1 January 2026.

3. Cryptocurrency Tax (Article 20E)

The new tax bill has specific reference to Cryptocurrency Tax (article 20E) which does not distinguish between physical or legal person. Therefore, it is stipulated that the tax rate for both individuals and corporates is at 8% subject to conditions as indicated below:

1. Profits of any person arising from the disposal of crypto-assets shall be subject to taxation at a rate of eight percent (8%).
2. Notwithstanding the provisions of Article 13, any losses arising from the disposal of crypto-assets may only be offset against profits from the disposal of crypto-assets realized within the same tax year. Such losses cannot be carried forward to subsequent years or offset against profits of future years of the same person. The provisions of subsections (4) to (11) of Article 13 shall not apply.
3. For the purposes of this Article:
   (a) The term "crypto-assets" shall be interpreted according to paragraph 5 of subsection 1 of Article 3 of Regulation (EU) 2023/1114, whose market value is essentially represented and derived from the market value of crypto-assets.(b) The term "disposal of crypto-assets" means the sale of crypto-assets, the donation of crypto-assets, the exchange of one crypto-asset for another, and the use of a crypto-asset as a means of payment.
4. The provisions of this Article shall not apply in cases where the crypto-assets disposed of were acquired through mining activities.
5. Any profit arising from crypto-asset transactions that does not fall within the provisions of this Article shall be taxed according to Parts III and V of this Law.

Frequently Asked Questions

• What will the Cyprus Crypto Tax Rate be as of 2016?
  Profits from selling, donating, exchanging, or spending cryptocurrency will be taxed at a flat 8% rate.
• How can previous or future losses can be used?
  Crypto losses can only offset crypto gains within the same tax year. They cannot be carried forward or used against other types of income.
• What is the definition of Crypto Assets?
  "Crypto-assets" are defined as per EU Regulation 2023/1114 (MiCA) — essentially, digital assets whose value comes from their market value.
• What counts as a "disposal":
  Selling crypto, giving it away, swapping it for another crypto, or using it to pay for goods/services all count as "disposals" that trigger tax.
• I am a miner. How will I get taxed?

This special crypto tax does not apply to crypto obtained through mining — those profits are taxed under the general income tax rules instead.

• Fallback rule:
  Any crypto-related profit not covered by this article is taxed under the normal provisions of Cypriot tax law (Parts III & V).

4. Special Defense Contribution (SDC)

Non-Domiciled Persons

An alternative taxation method is introduced for non-domiciled individuals (Section 3D) who have completed 17 years of residence in Cyprus, allowing them to opt for a five-year (renewable for another five years) tax period by paying a lump-sum amount of €250,000 covering the entire five-year period.

Who it applies to:

Individuals without domicile in Cyprus who are considered to have acquired domicile in Cyprus may opt for an alternative lump-sum taxation method, paying a fixed annual special defense contribution of €50,000, regardless of their income.

Binding period:

The choice is irrevocable and binding for a period of five consecutive tax years.

Application process:

The individual must submit an application on a designated form by June 30 of the first year of the five-year period, and it must be accepted by the Tax Commissioner.

Payment:

The contribution is payable in one lump sum of €250,000, covering all five years, by the end of the month following acceptance of the application. If not paid on time, the alternative method does not apply, and the individual is taxed under normal rules based on income.

Other rules:

The lump-sum contribution cannot be offset against other taxes or credits.

Payment fully satisfies all obligations for the five-year period.

Payments are non-refundable, and no foreign tax credits apply.

Renewal:

An individual may opt for this alternative method for up to two five-year periods.

5. Capital Gains Tax (CGT) Amendments

One of the most important Capital Gains Tax (CGT) Amendments for the majority of Cypriots is the abolition of tax when a property owner (physical or legal person) exchanges their property to a developer or equivalent for further construction arrangements. This will help many Cypriot trapped property owners develop their assets and off course it will help the economy and tax funds.

What is Antiparochi?

As defined by the bill; "It is further provided that, for the purposes of this paragraph, the term 'exchange' also includes a 'property-in-exchange arrangement' (antiparochi), where 'antiparochi' means an agreement under which the owner of a plot of land transfers part of it to a contractor for the construction of a building thereon, in return for granting the owner, after the construction, ownership rights over certain units or parts of the building constructed on the portion of the land transferred to the contractor and on the portion of the land that remains in the ownership of the owner, provided that the construction of the said units or parts, as specified in the agreement, is completed within five years from the date of the agreement."

Summarised table with key Capital Gains Tax amendments