Cyprus Tax Reform 2026: Main Changes for Companies and Individuals

From 1 January 2026, Cyprus implemented its most significant tax overhaul in over two decades, raising the corporate income tax rate to 15%, cutting dividend tax for resident individuals to 5%, abolishing stamp duty and the deemed dividend regime for future profits, as well as introducing new rules on tax residency, crypto taxation, and share-based remuneration.

Below is a practical breakdown of what changed for individuals and corporates, including transitional rules you must not miss.

A) Corporate Tax Changes

1. Corporate Income Tax (CIT) Rate: 12.5% → 15%

The headline change: the standard corporate income tax rate increased from 12.5% to 15% for tax years beginning on or after 1 January 2026.

- Applies to all Cyprus tax-resident companies, regardless of size or turnover.

- Profits up to 31 December 2025 remain taxed at 12.5%.

- No small-company carve-out or reduced band was introduced.

2. Loss Carry-Forward: 5 → 7 Years

Tax losses can now be carried forward for 7 years instead of 5, giving companies more flexibility to offset future profits.

3. Deemed Dividend Distribution (DDD): Abolished for 2026+ Profits

The controversial rule that deemed 70% of after-tax profits as distributed two years after the end of the tax year has been abolished for profits earned from 2026 onwards.

Transitional trap:

Profits from 2024 and 2025 remain subject to the old 70% deemed distribution rule:

- 2024 profits: deemed distributed on 31 December 2026

- 2025 profits: deemed distributed on 31 December 2027 

SDC at 17% applies to the deemed amount for Cyprus-resident and domiciled shareholders.

4. Special Defence Contribution (SDC) on Dividends: 17% → 5%

For dividends paid out of profits earned from 2026 onwards, SDC for Cyprus-resident and domiciled individuals dropped from 17% to 5%.

Transitional rule: 

Dividends paid out of profits up to 31 December 2025 remain subject to 17% SDC if received on or before 31 December 2031.

5. Stamp Duty: Fully Abolished

Stamp duty on documents (including share purchase agreements, loan agreements and property sale contracts) was abolished from 1 January 2026. Certain stamp duties may still apply as a transition and subject to the responsible government department.

- Instruments signed on or after 1 January 2026: no stamp duty.

- Instruments signed on or before 31 December 2025: old rules and penalties still apply if not stamped.

6. Default Tax Residency Test for Companies

A company incorporated under the Cyprus Companies Law is now presumed tax resident in Cyprus unless a double tax treaty provides otherwise.

This closes the "Cyprus company, Dubai management" loophole and means:

- Worldwide income is taxable in Cyprus by default.

- Beneficial ownership (UBO) filings and annual confirmations are now critical compliance items.

7. IP Box: Effective Rate Now ~3%

The IP Box regime (80% deduction on qualifying IP profits) remains unchanged but because the corporate rate is now 15%, the effective tax rate on qualifying IP income is approximately 3% (20% × 15%).

8. Crypto Gains: Flat 8% Tax

Qualifying gains from the disposal of crypto-assets are taxed at a flat 8% rate from 1 January 2026, for both individuals and companies.

- Applies to disposals (selling for fiat, using crypto to pay for goods/services, gifting).

- Mining, staking and airdrops may be taxed differently (often as income at progressive rates or 15% for companies).

9. Approved Share-Based Schemes: 8% Flat Tax

Employee share options and share-incentive schemes that meet approval conditions are taxed at a flat 8% rate on the benefit at exercise, instead of progressive rates up to 35%.

- Applies up to 2× annual remuneration per year and a €1M lifetime cap over 10 years.

- Transitional migration window for pre-2026 schemes: apply by 30 June 2026.

B) Individual Tax Changes

1. Personal Income Tax Bands: Higher Thresholds, Wider Brackets

The tax-free allowance increased from €19,500 to €22,000, and all bands above it were widened:

Taxable Income (€) | Rate

0 – 22,000         -  0%  

22,001 – 32,000    - 20% 

32,001 – 42,000    - 25% 

42,001 – 72,000    -  30% 

Over 72,000        - 35% 

Result: the top 35% rate now applies only above €72,000 (previously €60,001).

2. SDC on Dividends: 17% → 5% (for 2026+ Profits)

As noted above, Cyprus-resident and domiciled individuals now pay 5% SDC on dividends from profits earned in 2026 or later.

3. SDC on Rental Income: Abolished

SDC on rental income has been fully abolished. Rental income remains subject to personal income tax at progressive rates, but the additional 17% SDC layer is gone.

4. 60-Day Tax Residency Rule: Easier to Qualify

The 60-day rule was simplified by removing the condition that you must not be tax resident in any other country.

From 2026, you qualify as Cyprus tax resident under the 60-day rule if you:

- Spend at least 60 days in Cyprus in the tax year;

- Do not spend more than 183 days in any other single country;

- Carry on a business, are employed or hold an office in a Cyprus tax-resident company (not terminated during the year);

- Maintain a permanent home in Cyprus (owned or rented).

This makes dual-residence scenarios far more workable, though treaty tie-breaker rules still apply.

 5. Non-Dom Status: Extension Option Introduced

Individuals with a domicile of origin outside Cyprus can now extend non-dom status beyond 17 years for up to two additional 5-year periods (max 10 extra years) by paying €250,000 per period in advance.

Non-doms continue to benefit from:

- No SDC on dividends and interest (for non-domiciled residents);

- No SDC on rental income (now abolished for everyone).

6. Crypto Gains: 8% Flat Rate

Same as for companies: individuals disposing of cryptoassets can elect for a flat 8% tax on qualifying gains.

What Stayed the Same (and Still Matters)

The reform preserved several key pillars of Cyprus's tax competitiveness:

- Participation exemption on dividends and disposal of shares (subject to conditions).

- Notional Interest Deduction (NID) on equity introduced into the company.

- Tonnage tax regime for shipping.

- Non-dom regime (with the extension option noted above).

- IP Box (now effectively ~3%).

- No capital gains tax on disposal of shares (except where >50% of value is Cyprus immovable property).

Practical Takeaways

A) For Company Owners

- Budget for 15% CIT on 2026+ profits; review pricing and margins accordingly.

- Plan dividends carefully: 5% SDC only applies to 2026+ profits; pre-2026 profits distributed by end-2031 remain at 17%.

- Address 2024 and 2025 profits before 31 December 2026/2027 to avoid unexpected 17% deemed dividend SDC.

- If you run a Cyprus company from abroad, confirm your tax residency position under the new default rule and relevant double tax treaties.

B) For Individuals and Expats

- If you earn over €22,000, you benefit from lower effective rates due to wider bands.

- The 60-day rule is now more accessible for founders and remote workers splitting time between Cyprus and another jurisdiction.

- Consider the €250,000 extension for non-dom status if you are approaching the 17-year limit and wish to maintain dividend tax advantages.

- Crypto investors and traders should segregate disposal gains (8%) from mining/staking income (likely taxed as ordinary income).

For All Taxpayers

- Stamp duty is gone for new documents so update your transaction checklists and templates.

- Keep clear records of profit vintages (2024, 2025, 2026+) to apply the correct SDC rates and DDD rules.

The information in this article is a general summary of the Cyprus tax reform effective from 1 January 2026 and is not intended as specific tax advice. Tax treatment depends on your individual circumstances, residency status, source of income and applicable double tax treaties. Rules on deemed dividends, transitional provisions, crypto taxation and share-based remuneration involve additional conditions and elections.

You should obtain professional advice tailored to your situation before making any decisions based on this article.

Need help applying the 2026 tax reform to your business or personal situation? 

Contact us today for a tailored review of your tax position, dividend planning, residency options and compliance strategy under the new rules.