Cyprus Tax Reform 2025: Major Changes, Impact & What Businesses Need to Know

March 12, 2025 Uncategorized

Introduction: A New Era for Taxation in Cyprus

In 2025, Cyprus is rolling out a landmark tax reform aimed at enhancing tax efficiency, boosting competitiveness, and aligning with global standards. From a corporate tax rate increase to the abolition of deemed dividend distribution, these changes will significantly impact businesses, investors, and individuals.

This comprehensive guide breaks down everything you need to know about the 2025 Cyprus Tax Reform, its implications, and how to prepare for the upcoming changes.

Key Cyprus Tax Reform Updates for 2025

1. Corporate Income Tax (CIT) Increase

  • New CIT Rate: 15% (up from 12.5%) in alignment with OECD’s global tax framework.
  • Impact: Increased tax burden for businesses but maintains Cyprus’s tax attractiveness compared to other jurisdictions.

2. Special Defence Contribution (SDC) Overhaul

  • Abolition of SDC on Rental Income.
  • Dividend SDC Rate Reduction: 17% → 5% for Cyprus tax residents and domiciled individuals.

3. Personal Income Tax Relief

  • Higher Tax-Free Threshold: Increased to €20,500.
  • New Tax Brackets: The 35% top tax rate will apply only to incomes exceeding €80,000.
  • Household-Based Deductions: Tax benefits for families, students, mortgages, and green home investments.

4. Strengthened Tax Residency Rules for Companies

  • Enhanced Residency Criteria: Based on management and control.
  • New IP Box Regime: Favorable tax treatment for intangible assets.

5. End of Deemed Dividend Distribution (DDD)

  • Full Abolition: No more deemed dividends.
  • New 5% Withholding Tax: On actual dividend distributions for Cyprus tax residents and domiciled individuals.

6. Tackling “Closely Held Companies”

  • Lifting of Corporate Veil: Tax authorities may reclassify shareholder income as direct business income.
  • Salary Adjustments: Authorities may revise reported salaries to match market levels.

7. Incentives for Green & Digital Investments

  • Super Tax Deductions: For green projects, digital transformation, and upskilling employees.
  • Accelerated Depreciation: For eco-friendly and tech investments.

8. Tax Residency for Individuals: Stricter Rules

  • 183-Day Rule Remains.
  • 60-Day Rule Tightened: Now requires a business center of activity in Cyprus.

9. Non-Domiciled (Non-Dom) Regime Adjustments

  • Regime Retained: But with extensions and an annual fee for maintaining non-dom status.

Timeline for Implementation

✔ Q1 2025: Draft legislation under review
✔ Q2 2025: Finalization of reform proposals
✔ Q3 2025: Parliamentary submission
✔ Q4 2025: Expected approval and enforcement

What This Means for You & Your Business

The 2025 Cyprus tax reforms introduce new opportunities and challenges for businesses and individuals. While some changes—such as tax relief for households—are welcome, others, like the higher corporate tax rate, require strategic planning.

To stay ahead, companies should:


✔ Review tax structures and assess impact

✔ Optimize corporate tax strategies

✔ Leverage new incentives for green and digital investments

✔ Seek expert advice to navigate the new landscape

Stay Compliant & Maximize Tax Efficiency – Get Expert Guidance Today!

With significant tax changes on the horizon, businesses and investors must act now to optimize their tax positions.

Need tailored tax advice? Contact our expert team today for a personalized consultation on how the 2025 Cyprus Tax Reform affects you.

Stay ahead of the tax curve! Reach out now to ensure compliance and maximize your tax efficiency.

Contact details

Tel. +357 22 340000

Email: [email protected]

The authors expressly disclaim all and any liability and responsibility to any person, entity, or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly, no person, entity, or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.