Cyprus has approved a comprehensive tax reform, effective 1 January 2026, which raises the corporate tax rate to 15%, cuts dividend and cryptocurrency taxes, introduces stricter anti-evasion measures, and offers incentives for R&D and foreign investment.
The Cyprus Council of Ministers has approved the tax reform plan after the Cyprus Tax Reform Team presented its tax proposals to key stakeholders at the Presidential Palace on 26 February 2025.
The main tax measures are:
Corporate tax rates
As of 1 January 2026, significant tax reforms will significantly reshape the business landscape. The deemed dividend distribution will be eliminated, and the exceptional defence contribution on actual dividends will drop from 17% to 5%.
However, the corporate tax rate will rise from 12.5% to 15%, aligning with global standards, and an 8% tax will be applied to cryptocurrency profits. Companies will also benefit from an extended loss carry-forward period of seven years, up from five.
To further promote innovation, businesses can claim a 120% tax deduction on research and development expenses.
Tackling tax evasion
The tax reform also introduces stricter measures to combat tax evasion, including a three-strike system for irregularities, with potential penalties such as temporary closures if issues persist.
Other tax measures
- The personal tax-free threshold has been increased to EUR 20,500, providing benefits for families earning up to EUR 80,000 (or EUR 100,000 for larger families).
- The tax-free amount for voluntary retirement increased to EUR 200,000.
- Plans for property and business taxes have been paused.
- The non-dom company fee has been reduced from EUR 250,000 to EUR 50,000 for five years to encourage foreign investment.
The Minister of Finance urged Parliament to approve the reform by the end of 2025, so it can take effect on 1 January 2026, following its publication in the Official Gazette.
