Based on the most recent information available and ongoing coordination between the Cypriot government and Parliament, a comprehensive tax reform package is expected to be approved before the end of this year, with an effective date of 1 January 2026. While the final legislative texts have not yet been formally enacted, there is now broad convergence on the substance of the measures outlined below.
Corporate Tax
The corporate income tax rate is expected to increase from 12.5 percent to 15 percent. This adjustment reflects Cyprus’ alignment with evolving international tax standards, including the global minimum tax environment, while preserving its competitive positioning within the European Union.
In parallel, the loss carry-forward period is expected to be extended from five to seven years, providing additional planning flexibility for businesses with longer-term investment strategies or delayed profitability.
Dividends and Special Defence Contribution
The deemed dividend distribution rules are expected to be abolished for profits generated from 2026 onwards. This represents a fundamental structural change and removes a long-standing source of artificial tax leakage for closely held companies where no actual distributions were made.
Special Defence Contribution on actual dividend distributions is expected to be reduced from 17 percent to 5 percent. In addition, SDC on rental income is expected to be fully abolished.
A new anti-avoidance rule targeting concealed dividends is expected to be introduced. Under this framework, value extracted from a company without a formal dividend declaration may be subject to SDC at a rate of 10 percent. The rule is designed to capture profit extraction through alternative or non-transparent means, including advances to shareholders, low or no interest shareholder loans, non-commercial related-party lending, and excessive remuneration paid to shareholder-employees that cannot be commercially justified.
Personal Income Tax
The personal income tax-free threshold is expected to increase to 22,000 euros. Income tax bands are expected to be revised, with the top marginal rate of 35 percent applying only to income exceeding 80,000 euros.
The Cyprus non-domicile regime is expected to be retained. Current discussions relate primarily to optional extension mechanisms rather than any restriction or curtailment of the regime, confirming its continued importance in Cyprus’ offering to internationally mobile individuals, entrepreneurs and investors.
Crypto Assets
A dedicated tax framework for crypto assets is expected to be introduced for the first time. The current draft provides for a flat 8 percent tax on gains arising from the disposal of crypto assets.
Disposal is defined broadly and includes sale, exchange, use of crypto assets as a means of payment, and gifting. Losses are expected to be ring-fenced and offset only against crypto gains arising in the same tax year. Mining activities are not covered by the 8 percent disposal tax and are expected to continue to fall under general income tax principles.
Although the draft legislation refers primarily to “persons”, prevailing professional interpretations suggest that the regime is intended to apply to both individuals and companies. This is expected to be clarified in the final wording.
Closing Remarks
The above reflects the current position based on the most recent and reliable information available at this stage. While the final legislative texts are still pending, this is broadly where matters stand today and is widely understood to represent the structure and substance of the tax amendment package that is expected to be approved before the end of this year.
If implemented as anticipated, these measures will significantly reshape key aspects of the Cyprus tax system. Savva & Associates is closely monitoring developments and is already advising clients on the implications and potential restructuring opportunities ahead of the expected 1 January 2026 implementation date. Further updates will follow as soon as the final legislation is approved and published in the official Gazette.
Please get in touch with our team at:
| Charles Savva Managing Director BA, MBA, TEP, CA [email protected] +357 22516671 | Mina Pieri Senior Manager FCCA, MBA [email protected] +357 22510207 | Makis Pavlou Account Manager FCCA [email protected] +357 22510257 |