Main Explanation of Amendment

The Cyprus Income Tax Law has been amended to extend the tax loss carry forward period from five (5) years to seven (7) years.

Under the previous rules, tax losses could only be carried forward and offset against taxable profits for up to five years following the year in which the loss was incurred.

Following the amendment, losses may now be carried forward for seven years, allowing businesses a longer period to utilise tax losses against future taxable profits.

For example:

• A tax loss incurred in 2019 can now be offset against profits up to the 2026 tax year, instead of only up to 2024 under the previous regime.

This amendment applies from 1 January 2026.

Technical Clarification / Mechanics

The amendment also clarifies the order of utilisation of losses when group relief applies.

Where a company receives group losses from another group company under Article 13, the following order applies:

1️⃣ The claimant company must first offset its own carried-forward tax losses from previous years.

2️⃣ Only after exhausting its own losses may the company utilise group losses surrendered by another group company.

This clarification ensures that group loss relief does not override the utilisation of a company’s own carried-forward losses.

Example – Interaction of Carry Forward Losses and Group Relief

Scenario

Company A Ltd and Company B Ltd form a group for the purposes of Article 13.

Step 1 – Use of Company A’s own losses

Company A must first utilise its own carried-forward losses from 2019.

Profit before group relief:

€1m – €0.5m = €0.5m

Step 2 – Use of group losses

Company A may then utilise the group loss surrendered by Company B.

€0.5m – €0.5m = €0 taxable profit

Remaining loss of Company B

Company B still has:

€0.7m – €0.5m = €0.2m

This balance may be carried forward by Company B and utilised against its future taxable profits until 2033.

Example – Losses Outside the Seven-Year Window

Assume instead that Company A has losses from 2018.

Losses from 2018 may only be carried forward until 2023.

Therefore, these losses cannot be used in 2026.

Company A may only utilise the group losses from Company B.

Taxable profit:

€1m – €0.7m = €0.3m

Commentary (Policy Rationale)

The extension of the loss carry forward period to seven years reflects commercial reality, particularly for businesses with longer investment cycles or delayed profitability.

This change aligns Cyprus more closely with international practices and provides businesses with greater flexibility in utilising tax losses during economic cycles.

For a complete explanation of how tax losses are treated under Cyprus tax law, including carry forward rules, group relief and limitations on loss utilisation, see our detailed guide:

👉 Cyprus Business Loss Treatment – Carry Forward and Group Relief

This guide explains the general framework for Cyprus tax losses, while this publication focuses specifically on the 2026 reform extending the carry forward period from five to seven years