Effective January 1, 2026, Cyprus is implementing its most significant tax overhaul in over two decades. These changes aim to align with the OECD Global Minimum Tax (Pillar Two) while providing social relief for households and incentives for the tech and crypto sectors.
Whether you are an entrepreneur, a “Non-Dom” resident, or a digital nomad, here is what you need to know about the Cyprus Tax Reform 2026.
🏢 1. Corporate Tax & Business Updates
The headline change is the increase in the statutory rate, balanced by the removal of several administrative burdens.
- Corporate Income Tax (CIT) Rate: Increases from 12.5% to 15%. This aligns Cyprus with international standards but remains highly competitive within the EU.
- Abolition of Stamp Duty: The Stamp Duty Law has been repealed. Most contracts and agreements are now exempt, significantly lowering transactional costs.
- Deemed Dividend Distribution (DDD): Abolished for profits generated from 2026 onwards. Companies can now retain and reinvest profits without “forced” taxation.
- Loss Carry-Forward: Extended from 5 years to 7 years, aiding long-term business recovery and investment cycles.
👤 2. Personal Income Tax (PIT) & New Brackets
The reform increases the tax-free threshold to €22,000 (up from €19,500), offering relief to middle-income earners.
New 2026 Personal Tax Scale
| Taxable Income (€) | Tax Rate |
| 0 – 22,000 | 0% |
| 22,001 – 32,000 | 20% |
| 32,001 – 42,000 | 25% |
| 42,001 – 72,000 | 30% |
| Over 72,001 | 35% |
- Foreign Pensions: The flat tax option is now available for pensions exceeding €5,000 (previously €3,420).
- Ex-Gratia / Termination Payments: Amounts up to €200,000 are tax-free; anything above is taxed at a flat 20%.
đź’° 3. Dividends & Special Defence Contribution (SDC)
The tax burden on profit extraction for Cyprus residents has been significantly reduced.
- SDC on Dividends: Reduced from 17% to 5% for actual distributions to Cyprus tax-resident and domiciled individuals.
- Rental Income: SDC on rent is abolished. Rental income is now only subject to Income Tax and GHS (GESY).
- Non-Dom Status: The 17-year “Non-Dom” window remains. However, you can now extend it for two more 5-year periods by paying a €250,000 lump sum per period.
🚀 4. Innovation: Crypto & Employee Incentives
Cyprus is doubling down on its “Tech Island” status with modern tax treatments.
- Crypto-Assets: A new flat 8% tax rate applies to gains from crypto-asset disposals. Same-year losses can be offset.
- Employee Stock Options: Gains from approved schemes are now taxed at a flat 8%, capped at twice the employee’s annual remuneration.
- R&D Super-Deduction: The 120% deduction for qualifying R&D expenses is extended until 2030.
đź“ť 5. Compliance & Green Initiatives
- Mandatory Filing: All residents aged 25–71 must file an annual return, even with zero income.
- Rent Transparency: From July 1, 2026, all rent payments over €500 must be made via bank or electronic transfer.
- Capital Gains Tax (CGT): Lifetime exemptions for a primary residence have increased to €150,000.
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