Cyprus Tax Reform 2026 – All Changes to Income Tax, Corporate Tax, CGT & Non-Dom

The Cyprus tax reform package has been approved by the House of Representatives, marking a substantial update to the country’s tax framework for individuals, families, investors and businesses.

The reform introduces a new personal income tax scale, enhanced family and student tax deductions, important changes to corporate taxation, and a broader modernisation of the tax system. The new rules will apply from 1 January 2026, making 2025 a key planning year for taxpayers and businesses alike.

Overview – Key changes at a glance

• Effective date: 1 January 2026 – the existing tax framework continues to apply during 2025.
• New personal income tax brackets, with a tax-free threshold of €22,000 and a top rate of 35%.
• Enhanced tax deductions for families and students, granted per parent, subject to income thresholds. (Child-related reliefs operate as a tax credit and may be utilised only up to the amount of tax arising for each parent.)
• Major corporate tax changes, including a 15% corporate tax rate and the abolition of deemed dividend distribution.
• System modernisation measures, promoting transparency and alignment with international practices.

What has changed since our initial Rightax publication

In our initial article (March 2025), we presented the proposed framework of the tax reform. Since then:

• the core legislative package has been approved by Parliament,
• amendments refining specific provisions have also been adopted,
• the implementation date remains 1 January 2026.

What changes from 1 January 2026

The reform affects both individual taxpayers and companies. Below is a structured overview of the main provisions that have been finalised.

Personal income tax – key points

New personal income tax brackets

• income up to €22,000: 0% (tax-free)
• €22,001 – €32,000: 20%
• €32,001 – €42,000: 25%
• €42,001 – €72,000: 30%
• income above €72,001: 35%

The above rates apply progressively and replace the existing tax brackets. The current personal income tax rates remain applicable until 31 December 2025.

👉 To view the current personal income tax rates (up to 2025), click here.

Family tax deductions

(These deductions are offset against the taxable income)

Child-related tax reliefs apply per parent and are progressive. Where a parent has no tax liability, any unused portion of the relief does not give rise to a refund.:

• 1st child: €1,000 per parent
• 2nd child: €1,250 per parent
• 3rd and each additional child: €1,500 per parent

These deductions are subject to annual family income thresholds:

• up to €100,000 for families with 1–2 children
• up to €150,000 for families with 3–4 children
• up to €200,000 for families with 5 or more children

Housing-related tax deductions

• Primary residence rent: tax deduction up to €1,500 per year
• Mortgage interest on primary residence: tax deduction up to €2,000 per year
• Selected energy-efficiency expenses (e.g. home energy upgrades): tax deduction up to €1,000 (for each member of the household, subject to the maximum income threshold applicable, depending on the number of children)
• Insurance of the primary residence against natural disasters: up to €500

The above deductions will apply subject to income criteria, which are expected to be further clarified through implementing guidance.

Housing-related deductions, including home insurance, operate as deductions from the taxable income of the individual who incurs and substantiates the relevant expense.

Students – personal tax deductions

• Student-related deductions apply per parent and are personal in nature. They apply to the parent who incurs and substantiates the relevant expense and do not automatically apply in full to both parents for the same cost,
• age limits: up to 23 years (female students) and 24 years (male students),
• amounts follow the same progressive structure as for children:
  • 1st student: €1,000
  • 2nd student: €1,250
  • 3rd and each additional student: €1,500

Corporate taxation – key points

• Corporate income tax rate increased to 15% from 1 January 2026.
• Abolition of deemed dividend distribution (DDD) for profits earned from 2026 onwards.
• Reduction of Special Defence Contribution on actual dividends from 17% to 5%.
• Introduction of an anti-avoidance measure whereby the personal use or transfer of a company asset to a shareholder is treated as a deemed distribution of dividends, subject to Special Defence Contribution at a rate of 10%.
• Abolition of Special Defence Contribution on rental income.
• Full abolition of stamp duty on contracts and transactions.
• Taxation of crypto-asset disposal gains at a flat rate of 8%, where included in taxable income.
• Extension of tax loss carry-forward period from 5 to 7 years.
• Increase of allowable entertainment expenses to €30,000 for tax purposes.
• Taxation of employee stock options at a flat rate of 8%, under approved schemes.
• Increase of the threshold triggering the obligation to prepare audited financial statements, with the turnover limit rising from €70,000 to €120,000.
• Abolition of the distinction between trading and non-trading interest, with all interest income received being subject to corporate income tax.
• Extension until 2030 of the additional 20% deduction on eligible Research and Development (R&D) expenditure relating to intangible assets.
• Extension until 2030 of the enhanced capital allowances for expenditure on energy efficiency upgrades, including electric vehicles.
• Enhanced capital allowance of 25% for investments in machinery and installations used for agricultural or livestock production, after deduction of any subsidy received.
• Tax deduction for contributions to cultural institutions approved by the Deputy Ministry of Culture, up to an amount of €50,000.

Changes to Capital Gains Tax (CGT)

The reform significantly increases the lifetime tax-free thresholds for the purposes of Capital Gains Tax arising from the disposal of immovable property.

• Any disposal of immovable property: €30,000

• Disposal of a primary residence: €150,000

• Disposal of agricultural land: €50,000

Furthermore, the introduction and clarification of roll-over relief from Capital Gains Tax applies in cases where the disposal of immovable property takes place as part of a land-for-development arrangement (exchange) for the construction of a development or a subdivision of land plots. In such cases, the taxation of the capital gain is not imposed at the time of disposal but is deferred and carried forward to a later stage, subject to the conditions prescribed by the relevant legislation.

Non-Domicile Regime (Non-Dom)

The possibility to extend the non-domicile (non-dom) regime beyond the initial 17-year period is introduced, for two additional five-year periods (5+5 years), subject to the payment of a lump sum of €250,000 at the beginning of each five-year period. The maximum duration of the non-dom regime is therefore extended to a total of 27 years.

Is the reform in force now?

Although the legislation has been approved, the new tax rules will apply from 1 January 2026. Until then, the existing tax framework remains in force.

Note: For specific cases (e.g. allocation between spouses, eligibility criteria and documentation requirements), further clarification is expected through implementing guidelines and circulars issued by the Tax Department.

What should individuals and businesses do now?

With 2026 approaching, proactive planning is strongly recommended:

• assess the potential impact of the new rules on income and structures,
• review dividend and remuneration strategies,
• evaluate family, housing and personal tax deductions in advance.

How Rightax can support you

Rightax provides tailored tax and business advisory services to help individuals, investors and companies prepare smoothly and confidently for the new Cyprus tax framework.

Contact us for a personalised review and forward-looking tax planning.

Reach out for expert help with tax, accounting, audit, or company setup in Cyprus.

+357 99 108 510

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