Cyprus Tax Reform 2026: What Businesses & Individuals Need to Know - Alexandrou Corporate Services Insight
- Alexandrou Corporate
- 6 days ago
- 3 min read
Cyprus is entering a new tax era. With the enactment of the Cyprus Tax Reform 2026, the country introduces the most substantial overhaul of its tax framework in more than two decades. The reform, effective mainly from 1 January 2026, aims to modernise the tax system, enhance transparency, align with international standards, and strengthen Cyprus’s position as a reputable business and investment hub.
At Alexandrou Corporate Services, we closely monitor legislative developments to ensure our clients remain compliant, informed, and strategically positioned. Below, we outline the key changes and what they mean for businesses, shareholders, and individuals.
Key Corporate Tax Changes
Corporate Income Tax Rate
The corporate income tax rate will increase from 12.5% to 15% for profits generated from 2026 onwards. While this represents a shift from Cyprus’s historically low rate, it aligns the country with global minimum tax initiatives while maintaining competitiveness within the EU.
Expanded Tax Residency Rules
Cyprus introduces the incorporation test for corporate tax residency. Companies incorporated in Cyprus will be considered Cyprus tax residents, unless tax residency is determined otherwise under an applicable double tax treaty.
Loss Utilisation
Businesses will benefit from greater flexibility, as tax losses may now be carried forward for up to seven (7) years, compared to the previous five-year limit.
Dividend & SDC Reforms
The deemed dividend distribution rules are abolished for profits generated after 2025.
Special Defence Contribution (SDC) on actual dividends received by Cyprus tax-resident and domiciled individuals is reduced from 17% to 5%.
A 5% withholding tax applies to dividends paid to associated companies in low-tax jurisdictions.
These changes simplify dividend taxation and improve cash-flow planning for shareholders.
Abolition of Stamp Duty
From 1 January 2026, stamp duty is abolished for most contracts, significantly reducing transactional costs and administrative burden.
Special Tax Treatments
Crypto-asset gains will be taxed at a flat rate of 8%, with losses ring-fenced.
Approved stock option plans will also benefit from an 8% tax rate, subject to conditions.
Personal Taxation Updates
Increased Tax-Free Threshold
The tax-free income threshold increases from €19,500 to €22,000, offering immediate relief to individuals and households.
New Progressive Tax Bands
The personal income tax structure is revised as follows:
€22,001 – €32,000: 20%
€32,001 – €42,000: 25%
€42,001 – €72,000: 30%
Over €72,000: 35%
Enhanced Deductions & Allowances
New targeted allowances are introduced, particularly supporting families, housing-related expenses, and dependent students, reinforcing the reform’s social dimension.
Mandatory Tax Return Filing
All Cyprus tax residents aged 25 and above will be required to submit an annual income tax return, even where no tax liability arises.
Compliance & Administration Enhancements
The reform strengthens the powers of the Tax Commissioner, including:
Expanded audit and enforcement capabilities
Increased access to financial information
Updated transfer pricing documentation thresholds
In addition, tax return deadlines are streamlined, with extended submission timelines and harmonised payment dates for corporate taxpayers.
Why This Reform Matters
The Cyprus Tax Reform 2026:
Aligns Cyprus with OECD and EU tax standards
Simplifies dividend and profit distribution rules
Encourages transparency and long-term compliance
Maintains Cyprus’s attractiveness for international business, investment, and relocation
For businesses and individuals alike, early planning is essential to maximise benefits and avoid unnecessary exposure.
How Alexandrou Corporate Services Can Help
At Alexandrou Corporate Services, we provide end-to-end support covering:
Corporate and personal tax planning
Dividend and shareholder structuring
Compliance, filings, and advisory
Business restructuring and substance review
Our team is ready to assess how the new tax framework impacts your specific circumstances and to design tailored, forward-looking solutions.
Contact us today to discuss how the Cyprus Tax Reform 2026 affects you and how we can help you navigate the changes with confidence.
T: +35725753050