Cyprus has approved a far-reaching tax reform, marking the most significant overhaul of its tax framework in more than 20 years. The new regime, effective 1 January 2026, introduces a 15% corporate tax rate, while pairing this increase with targeted incentives for businesses and meaningful relief for middle-class families.

The reform aims to enhance Cyprus’ competitiveness, support households, attract investment, and strengthen tax transparency, while also equipping the Tax Department with additional tools to combat tax evasion.

Key aspects of the tax reform include:

• Complete abolition of deemed dividend distribution
• Reduction of the Special Defence Contribution on dividends from 17% to 5%
• Abolition of the Special Defence Contribution on rents
• Abolition of stamp duty
• Increased exemptions for Capital Gains Tax purposes
• Increase of the personal tax-free threshold from €19,500 to €22,000, together with a readjustment of income tax brackets
• Significant tax allowances for families with children
• Tax allowances for housing-related and green expenses
• Tax deductions for rent and interest on performing home loans
• Introduction of an 8% tax on profits from the disposal of crypto assets

This reform modernises Cyprus’ tax system, balancing fiscal sustainability with social support and business-friendly measures, and represents a pivotal development for individuals and businesses operating in or through Cyprus.

Our team is available to assist with any questions arising from these changes and would be pleased to advise on any tax-related matter. Please feel free to contact us at info@pavlaw.com