🚀 Cyprus Tax Reform 2025: What’s Being Proposed for Individuals & Businesses?

The Cyprus government is considering major tax reforms that could reshape tax rules for both individuals and businesses. These proposals aim to modernize the system, enhance competitiveness, and promote fairness, but nothing has been finalized yet.

Here’s what could be coming next.

👥 Proposed Tax Changes for Individuals

💰 Possible Adjustments to Income Tax Brackets

A higher tax-free threshold and adjusted tax rates are on the table:

Taxable Income (€)	Proposed Tax Rate
0 – 20,500	0% (Tax-Free)
20,501 – 30,000	20%
30,001 – 40,000	25%
40,001 – 80,000	30%
80,001+	35%

🟢 What this could mean:

✔ More tax-free income, putting more money in your pocket

✔ Lower taxes for middle-income earners, making the system fairer

✔ Existing 20% and 50% exemptions remain unchanged, so those eligible still benefit

🏡 Rental Income – Will SDC Be Removed?

A key proposal suggests removing Special Defence Contribution (SDC) on rental income, which is currently at 2.25%.

Current Rule	Proposed Rule
Rental income taxed at 2.25% SDC	No SDC on rental income
Additional tax burden on landlords	Higher net earnings for property investors

This could make real estate more profitable, but it’s still under discussion.

📉 Dividend Tax – Could the Rate Drop?

The government is considering a major reduction in Special Defence Contribution (SDC) on dividends for Cyprus tax residents who are also domiciled in Cyprus.

Current SDC Rate	Proposed SDC Rate
17%	5%

If implemented, this could mean:

✔ More retained earnings for investors

✔ A stronger incentive to distribute dividends

✔ A boost for businesses and shareholders

👨‍👩‍👧 Family & Housing Tax Reliefs – Will You Pay Less?

Additional tax deductions for families and home expenses are being considered:

Relief Type	Proposed Deduction (€)
Per child (up to 19 for females, 21 for males)	€1,000
Per dependent student (up to 23 for females, 24 for males)	€1,000
Single parents	Same tax benefits as two-parent families
Mortgage/rent for primary residence	Up to €1,500 per year

This could make life easier for families, single parents, and homeowners, but details are still being discussed.

♻️ Green Tax Incentives – Encouraging Sustainability?

A new tax break for green investments is under consideration:

Eligible Expenses	Proposed Tax Relief (€)
Photovoltaic (PV) systems, heat pumps, electric cars	Deduction available
Energy-efficient home upgrades	€1,000 per spouse/partner per year (up to 5 years)

This could help homeowners reduce costs on eco-friendly upgrades while encouraging sustainability.

⚖️ Ex-Gratia & Severance Payments – Will Taxation Change?

Current Rule	Proposed Rule
Golden Handshakes taxable for employers only	Now taxable for employees too
Ex-Gratia payments fully taxable	Partial exemption under review

Employees could see a change in tax liability but businesses might still deduct severance payments.

🌍 Cyprus Tax Residency Rules – Could There Be a Shift?

The government is reviewing how tax residency is defined, possibly moving beyond the 183-day rule.

Current Residency Rule	Proposed Change
Must stay 183+ days in Cyprus	May include financial & social ties
Non-Dom status lasts for 17 years	Potential extension (with an annual levy)

This could offer more clarity for expats, long-term investors and high-net-worth individuals.

🏢 Proposed Tax Changes for Businesses

💼 Corporate Tax – Will It Rise?

A slight increase in the corporate tax rate is being proposed:

Current Rate	Proposed Rate
12.5%	15%

Even with this increase, Cyprus would still offer one of the lowest corporate tax rates in the EU.

📉 Dividend Tax – What’s Being Considered?

Who Pays?	Current SDC on Dividends	Proposed SDC Rate
Cyprus tax residents (domiciled)	17%	5%

This could lead to:

✔ More cash flow for investors

✔ A boost in business reinvestment

📑 Deemed Dividend Distribution (DDD) – Will It Be Abolished?

Current Rule	Proposed Rule
Companies must distribute and tax retained earnings after 2 years	No forced distribution, greater flexibility

Businesses could gain more control over profits if this change goes through.

🌿 Tax Perks for Green & Digital Business Investments?

Incentive	Potential Benefit
Super deductions on sustainability & tech upgrades	Bigger tax breaks
Faster depreciation	Lower taxable income
Tax relief for employee training in digital & green tech	More deductions
Unlimited carry-forward of losses for green & digital investments	Better tax planning

Businesses might receive greater incentives for going green and embracing digital transformation.

🔎 What’s Next?

The Cyprus Tax Reform 2025 proposals are still under consultation and nothing has been finalized.

✅ Stay informed—new updates may emerge.

✅ Plan ahead—consider how these changes could impact you.

✅ TaxAdvisor.cy will keep you updated on every key development.

💡 Want to prepare for potential changes? Contact us today!