The Cyprus Tax Reform 2026 was adopted by the House of Representatives in late December 2025 and subsequently published in the Official Gazette before the end of the year. The majority of the provisions entered into force on 1 January 2026.
The reform was developed as the Cyprus’ commitment to align with international tax standards, particularly the OECD’s Base Erosion and Profit Shifting (BEPS) framework and the global minimum tax initiative under Pillar Two.
The following overview is aimed to highlight the key elements of the Cyprus Tax Reform 2026.*
*This overview does not seek to cover all legislative amendments in full.
- Increase in Corporate Income Tax rate from 12.5% to 15%.
This adjustment aligns the jurisdiction with the global minimum tax threshold promoted by the OECD. The reform further introduces a specific corporate tax provision for crypto-related activities i.e., a preferential tax rate of 8% that applies to gains derived from a broad range of crypto transactions, including the disposal of crypto assets, their exchange for other digital assets, transfer by way of gift, as well as use as a means of payment.
- Extension of the carry-forward period for tax losses.
The period was increased from 5 to 7 years. Specific limitations apply to losses arising from crypto assets, which may only be offset against gains from similar assets within the same tax year. Such losses cannot be carried forward nor utilised under group relief provisions.
- Exit taxation
The provisions regarding exit taxation have been revised to stipulate that when a company establishes tax residency in Cyprus from a non-European Union (EU) country, the tax basis of its assets will be set at their fair value. Previously, this provision was limited to transfers originating from EU member states.
- Calculation of capital allowances in case of acquisition of IP assets in exchange for shares.
It is specified that the amount of capital expenditure eligible for capital allowances is limited to the fair market value of the asset at the time of its contribution.
- Changes to Dividend Taxation and Abolition of Deemed Dividend Distribution
– The Special Defence Contribution (SDC) on dividends paid to Cyprus tax resident and domiciled individuals has been reduced from 17% to 5% (transitional rules apply).
– The deemed dividend distribution (DDD) rules have been abolished (transitional rules apply).
– Provisions targeting “disguised dividends” in respect of individual shareholders (Cyprus tax resident and domiciled individuals) were introduced (transactions resulting in a transfer of value from a company without a formal dividend declaration may be reclassified as distributions and subject to Special Defence Contribution (SDC) at 10%, compared to the standard 5% rate).
– Withholding tax on dividends paid to low-taxed jurisdictions is 5%, dividends paid to blacklisted jurisdictions remain at – 17%.
- Abolition of Stamp Duty
The reform includes the abolition of stamp duty on certain transactions.
- Capital Gains Tax
– The threshold for indirect disposals of shares in property-rich companies has been reduced from 50% to 20%, thereby broadening the scope of transactions potentially subject to CGT.
– The exemption for shares listed on a “recognized” stock exchange has been replaced with a reference to “regulated” markets, with transitional rules preserving the previous treatment for shares acquired before 1 January 2026.
– Disposals of shares listed on non-regulated markets remain exempt from CGT where annual proceeds do not exceed EUR 50,000.
- Transfer Pricing Thresholds
The reform revises the thresholds triggering the preparation of transfer pricing local files. Specifically, documentation requirements apply where transactions with related parties exceed or are expected to exceed under the arm’s length principle:
- EUR 5 million in the case of transactions related to sale of goods,
- EUR 10 million for financing arrangements, and
- EUR 2.5 million for all other categories of transactions.
- Tax Administration
– The timeframe for filing annual income tax returns has been reduced to 13 months (previously 15 months) from the end of the tax year, with the payment deadline aligned accordingly.
– The statute of limitations has been revised to run for 6 years from the date of submission of the tax return including any amendments (books and records should be maintained for the same period).
– The reform further strengthens the enforcement framework by expanding the audit and collection powers of the tax authorities and introducing enhanced administrative penalties.
The Cyprus Tax Reform 2026 represents a balanced shift between maintaining competitiveness and aligning with international tax standards.
For businesses, investors, and individuals, the newly introduced changes create both opportunities and new compliance considerations. A careful review of existing structures and forward-looking planning will be essential to fully benefit from the updated framework.