Cyprus Tax Reform 2026: Every Change, and Which Year Each One Applies To

The reform was voted through on 22 December 2025 and published in the Official Gazette on 31 December 2025, giving nine days between enactment and effect. That timing matters more than it sounds. Most reference material written before 2026, including summaries still published by large professional services firms, shows the old figures. If you are checking a Cyprus rate against something written last year, assume it is stale until you have confirmed it.

This guide covers what changed, what survived unchanged, and the part most summaries skip: which rate applies to which tax year, because the old numbers are still correct for prior-year filings.

What changed on 1 January 2026

Corporate income tax: 12.5% to 15%

The headline rate rose by 2.5 percentage points. Cyprus had held 12.5% since 2013, and the rate was one of the lowest headline corporate rates in the EU. At 15% it now sits at the OECD and EU minimum-tax benchmark, which is the clearest signal of why the change was made.

The rate applies to the worldwide taxable profit of Cyprus tax-resident companies, on the same basis as before. Nothing changed about how taxable profit is computed, only the rate applied to it.

Dividends: SDC cut from 17% to 5%

Special Defence Contribution is a separate charge from income tax, levied on certain passive income of Cyprus tax residents. On actual dividends paid to individuals who are both Cyprus tax resident and domiciled, it fell from 17% to 5% for distributions out of post-2026 profits.

Two points that are easy to miss:

• Non-domiciled residents were already exempt and remain so. The non-dom regime, which exempts qualifying residents from SDC on dividends and interest for 17 years, survived the reform.
• GESY still applies. The national health contribution of 2.65% on dividend income for individuals is unaffected, within the 180,000 euro annual income cap.

SDC on passive interest income remains at 17%.

Deemed dividend distribution: abolished, with a two-year tail

The deemed dividend distribution (DDD) rules treated a Cyprus company as having distributed 70% of its accounting profits two years after the year end, whether or not any dividend was actually paid, and charged SDC on the deemed amount. It was a long-standing feature of Cyprus corporate planning and a frequent source of unexpected liabilities.

It is abolished for profits earned from 1 January 2026.

The transitional rule is the trap. Undistributed 2024 and 2025 profits remain within DDD until 31 December 2027. If your company has retained profits from those two years, the old regime still reaches them, and the timing of distributions from those specific vintages is worth planning deliberately rather than assuming the abolition covers everything.

Rents and stamp duty: gone

SDC on rental income, previously 3% charged on 75% of gross rent, is abolished for both individuals and companies. Stamp duty on documents is abolished for anything dated from 1 January 2026, though documents dated earlier remain subject to the old regime.

Personal income tax: wider bands, and everyone files

The bands widened at every level:

Alongside the wider bands, the reform introduced new deductions for dependent children, rent and mortgage interest, and green home upgrades.

One change carries an administrative sting: from tax year 2026, every Cyprus tax resident aged 25 to 70 must file a return regardless of income level. Filing moves exclusively to the Tax For All (TFA) portal, which is replacing TAXISnet. Plenty of people who have never filed in Cyprus now have an annual obligation.

Other business measures

• Loss carry-forward extended from 5 to 7 years. Group relief between Cyprus tax-resident group companies continues for current-year losses.
• Crypto-asset profits taxed separately at 8% on net profit. Keep per-asset records of acquisition cost and disposal proceeds.
• Stock options taxed at a special 8% rate, up to 1 million euros per 10 years.
• R&D super-deduction of 20% extended to 2030.
• Transfer pricing local-file thresholds raised to 10 million euros for financing transactions, 5 million for goods, and 2.5 million for other categories.
• Accelerated capital allowances for green and energy-efficiency spending to 2030, and 25% for agricultural capital expenditure.

What did not change

Several regimes people expected to be touched survived intact:

• The IP box. An 80% deemed deduction on qualifying profits from qualifying intellectual property remains. Because the headline rate rose, the effective rate on qualifying IP income moved from roughly 2.5% to roughly 3%.
• The Notional Interest Deduction on new equity, with the Tax Department continuing to publish the reference bond yields annually.
• The non-dom regime, exempting qualifying residents from SDC on dividends and interest for 17 years.
• The 50% and 20% expat employment exemptions for new arrivals.
• Tonnage tax for qualifying shipping, EU-approved through to the end of 2029.
• The abolition of the 350 euro annual company levy, which happened separately in 2024 and is often still quoted as payable. It is not. Arrears for 2011 to 2023 remain collectable.

Which year applies to which rate

This is the section that matters if you are filing rather than planning. Cyprus filing runs a long way behind the tax year, so 2025 returns are still being prepared well into 2027, using the old rates.

The provisional tax point is worth flagging. Cyprus charges a 10% surcharge where your estimate of current-year taxable income turns out to be less than 75% of the final figure. Companies that built their 2026 estimate off a 2025 liability computed at 12.5% may be carrying an estimate that is materially too low. The estimate can be revised up or down until 31 December, so the December instalment is the last chance to correct it.

What to do now

1. Check your 2026 provisional tax estimate against the 15% rate before the December instalment, and revise if the 75% test looks at risk.
2. Identify retained 2024 and 2025 profits and plan distributions against the DDD deadline of 31 December 2027.
3. Do not update prior-year workings. The 2025 return is correct at 12.5%. Changing it to match the current rate is a real and easily-made error.
4. Check who now needs to file. Residents aged 25 to 70 with no previous filing obligation have one from tax year 2026.
5. Re-verify any Cyprus figure you hold against gov.cy rather than a secondary summary, because the reform invalidated a large amount of published material overnight.

Sources

Every figure above comes from official Cyprus government sources:

• Cyprus Tax Reform portal (gov.cy)
• Business and corporate measures
• Individual measures
• Tax Department, individual income tax return and bands
• Registrar of Companies, abolition of the annual company levy

This guide is general information, not tax advice. Cyprus tax treatment depends on your specific circumstances, and a Cyprus-licensed auditor or tax adviser should confirm anything you plan to act on.

AccountsOS is live in Cyprus, with these rules built into the product and every rate carrying its source and the date it was verified. Ask Finn a question about a prior year and it answers with the rate that applied then, not the one that applies now.