Cyprus’s 2027 draft budget and medium-term fiscal framework outline corporate tax changes, higher personal income tax thresholds and targeted social and green deductions. The measures aim to strengthen economic competitiveness while maintaining fiscal balance through enhanced tax compliance and digital modernisation.
Cyprus has presented its 2027 state budget and Medium-Term Fiscal Framework for 2027–2029 to the Parliamentary Committee on Finance and Budget on 12 October 2026. Finance Minister Makis Keravnos presented the budget, which was approved by the Council of Ministers on 16 September and submitted to the Parliament President on 24 September 2026. Parliamentary scrutiny will continue through November, with a final vote expected in December.
The implemented tax reform package in Cyprus combines corporate tax realignment, individual tax relief, and institutional modernisation designed to support competitiveness while safeguarding public finances.
Corporate taxation & dividend restructuring
- Corporate income tax rate adjustment: As part of the 2026 tax reform, the corporate income tax rate was increased from 12.5% to 15%.
- Reduction in special defence contribution on dividends: The Special Defence Contribution rate applied to dividends was reduced to 5%.
- Abolition of deemed dividend distribution (DDD): The regime requiring deemed dividend distributions has been completely abolished for corporate profits generated from 2026 onward, easing administrative requirements and boosting predictability for businesses.
Personal income tax relief & social-green deductions
- Revised tax brackets & higher tax-free threshold: Personal income tax bands were restructured alongside an increase in the tax-free threshold to reduce the overall tax burden on individuals.
- Targeted social and green deductions: New deductions were introduced targeting children, post-secondary students, primary housing costs, and green investments.
Fiscal neutrality, overall revenue performance, and compliance infrastructure
- Fiscal neutrality & revenue balance: Cyprus’s tax package aims to remain fiscally neutral while improving economic competitiveness. Despite tax relief for individuals and businesses, Tax Department revenue rose by 5.7% to EUR 4,474.1 million in January–July 2026, up from EUR 4,232 million a year earlier.
- Tax share in budget revenues: The 2027 draft budget projects total revenue of EUR 13.59 billion, with direct and indirect taxes each contributing 42%–44%.
- Compliance & technological modernisation: The 2027 draft budget projects total revenue of EUR 13.59 billion, with direct and indirect taxes each contributing 42%–44%. To protect revenue and support the reforms, the Tax Department has introduced sector-wide compliance campaigns, staff training, stricter anti-evasion measures and the Tax For All (TFA) digital platform to modernise tax administration and taxpayer services.
