Cyprus Tax Reform 2026: New Rules and What Changes

Mar 17, 2026

Read time: 8 minutes

Miriam Alonso

Cyprus Tax Reform 2026: Every Change That Affects Expats

Cyprus implemented major tax reforms effective 1 January 2026 affecting corporate tax, personal income bands, dividend SDC rates, and crypto taxation. Parliament approved the changes on 22 December 2025. The reform represents the most significant overhaul in recent history, impacting nearly all tax areas for residents and expats.

If you are already living in Cyprus or planning to move here, this is the article you need to read. We break down every change that actually matters for expats , no legal jargon, just clear explanations of what changed, what stayed the same, and what it means for your wallet.

What Happened and Why

Cyprus reformed its tax system because the EU's Pillar Two global minimum tax directive made the old 15% corporate rate unsustainable, combined with a push to modernize while maintaining competitiveness. The framework had remained largely unchanged since 2002, creating pressure for comprehensive reform that would align with international standards while preserving Cyprus's appeal as a business destination.

The corporate tax rate in Cyprus increased to 15% from 1 January 2026. For a full breakdown of the rate, IP Box regime, and EU comparison, see our complete Cyprus corporate tax guide.

The government's approach was pragmatic: raise the headline corporate rate to 15% to comply with Pillar Two, but introduce new benefits and deductions to keep the effective tax burden reasonable. For expats specifically, the non-dom regime , the cornerstone of Cyprus's appeal , remains fully intact.

Corporate Tax: From 15% to 15%

Cyprus's corporate income tax rate remains 15%, effective 1 January 2026.

What this means in practice:

A company earning EUR 100,000 in profit now pays EUR 15,000 in corporate tax instead of EUR 12,500. That is EUR 2,500 more per year.

However, 15% is still one of the lowest corporate tax rates in the EU. For comparison:

Country	Corporate Tax Rate
Cyprus	15%
Ireland	15%
Hungary	9%
Bulgaria	10%
Romania	16%
Estonia	0% (retained) / 20% (distributed)
Germany	~30%
France	25%
Spain	25%

Cyprus and Ireland are now at the same rate. But Cyprus still wins on the total package when you combine corporate tax with the non-dom regime, no tax on capital gains from securities, and no inheritance tax.

Other corporate changes:

Tax loss carry forward extended from 5 to 7 years
120% super deduction for R&D expenditure extended to 2030
Transfer pricing local file thresholds increased
Stamp duty abolished entirely

SDC on Dividends: From 17% to 5% (For Domiciled Residents)

**H2/Question: SDC on Dividends: From 17% to 5% (For Domiciled Residents)**

Domiciled residents (Cypriots and long-term residents who have lost non-dom status) benefit from the SDC rate cut from 17% to 5% on dividends.

Before the reform:

SDC on dividends: 17%
SDC on interest: 30%
SDC on rental income: 3% (on 75% of gross rent)

After the reform (1 January 2026):

SDC on dividends: 5%
SDC on interest: 17%
SDC on rental income: 0% (exempt from SDC entirely , only regular income tax applies)

Income Type	SDC Before 2026	SDC After 2026	Non-Dom Status
Dividends	17%	5%	0% (exempt)
Interest	30%	3%	0% (exempt)
Rental income	3%	3%	3% (not exempt)

Key point for expats: If you are a non-dom (which most expats are for their first 17 years), the SDC reform does not change anything for you. You were at 0% before, and you remain at 0%. The reform mainly benefits Cypriots and long-term domiciled residents.

However, the reform does make Cyprus more attractive for people planning to stay beyond the 17-year non-dom window, since the SDC rate they will eventually face on dividends dropped from 17% to just 5%.

Important transitional rule: Dividends paid from profits earned before 31 December 2025 by Cyprus tax resident companies are still taxed at the old 17% rate if received before 31 December 2031. This means companies with retained earnings from previous years should plan their distribution strategy carefully.

Disguised Dividends: A New Anti-Abuse Rule

Disguised dividends are a new anti-abuse rule that expats with their own companies must understand.

A disguised dividend applies when a shareholder (direct or indirect) who is a natural person extracts value from a company through means other than a formal dividend distribution. Think: personal expenses paid by the company, loans to shareholders that are never repaid, or excessive compensation.

The tax rate on disguised dividends: 10% , double the normal 5% SDC rate on regular dividends.

Does this affect non-dom residents? This is where it gets nuanced. The non-dom exemption covers SDC on dividends. Whether disguised dividends fall under the same exemption is a question you should discuss with your tax advisor. The safe approach: distribute proper dividends and keep your corporate and personal finances clean.

New Income Tax Bands

The 2026 reform also updated personal income tax bands. The new brackets effective 1 January 2026 are: 0% up to EUR 22,000 (raised from EUR 19,500); 20% from EUR 22,001 to EUR 32,000; 25% from EUR 32,001 to EUR 42,000; 30% from EUR 42,001 to EUR 72,000; and 35% above EUR 72,000. These changes apply to all Cyprus tax resident individuals.

Taxable Income (EUR)	Old Rate	New Rate
0 - 19,500	0%	0%
19,501 - 28,000	20%	0%
28,001 - 36,300	25%	20%
36,301 - 60,000	30%	25%
Over 60,000	35%	35%

The net effect: The tax-free threshold increased from EUR 22,000 to EUR 22,000. Most bands shifted upward, meaning a slight tax reduction for most salary earners. For example, someone earning EUR 50,000 annually will pay slightly less income tax under the new bands.

New deductions for families:

EUR 1,000 to EUR 2,000 per child per parent (depending on family income)
Deductions for single-parent families
Deductions for housing and green transition investments

Crypto Assets: The 8% Flat Rate

**Crypto Assets: The 8% Flat Rate**

Cyprus taxes cryptocurrency gains at a flat 8% rate, regardless of holding period or gain size. This rate applies to all crypto asset disposals, whether you're selling Bitcoin, Ethereum, or other digital assets. The 8% flat rate replaced previous ambiguous rules and provides certainty for investors and traders. Capital losses on crypto assets can offset gains in the same year. You must report all crypto transactions to the tax authority, including purchase price, sale price, and transaction date.

Gains from selling, gifting, exchanging, or using crypto assets for payments are taxed at a flat 8% rate
Losses can only be offset against other crypto gains in the same year (no carry forward)
Gains from mining are excluded from the 8% flat rate and taxed as regular income

For non-dom residents: The 8% flat rate applies to gains from disposals. This is separate from the SDC exemption, which covers dividend and interest income. Crypto gains are treated as income, not dividends, so the non-dom status does not automatically exempt them.

Other Changes That Affect Expats

Deemed Dividend Distribution (DDD) has been abolished: companies no longer face forced dividend distributions from undistributed profits, giving business owners greater flexibility in profit retention and distribution planning. Companies are no longer forced to distribute a deemed dividend from undistributed profits. This gives business owners more flexibility in profit retention and distribution planning.

Share-based compensation: Employee stock options from approved schemes are now taxed at a flat 8% rate (up to twice your annual salary, then regular rates apply). The scheme must have a minimum 3-year vesting period. This makes Cyprus more attractive for startup employees.

Capital Gains Tax changes: The CGT exemption on shares now only applies to shares listed on regulated markets. Shares on unregulated markets may be subject to CGT above certain thresholds. This is a narrowing of the previous exemption.

Rental income: Now completely exempt from SDC (was previously 3% on 75% of gross rent). Rental income is only subject to regular income tax. Good news for property investors.

Stamp duty abolished: No more stamp duty on any transactions. This is a meaningful saving on property transfers and other legal documents.

The Bottom Line: Is Cyprus Still Worth It After the Reform?

Yes. Unequivocally.

The non-dom regime is untouched. The 60-day rule is untouched. No inheritance tax, no gift tax, no tax on capital gains from securities (on regulated markets) , all still in place.

The corporate tax increase to 15% was inevitable given EU Pillar Two requirements. Ireland made the same move. What matters is the total package, and Cyprus's total package remains one of the best in Europe:

0% on dividends and interest (non-dom, up to 17 years)
0% on capital gains from securities (regulated markets)
0% inheritance and gift tax
15% corporate tax (with generous deductions)
8% flat rate on crypto gains
50% income tax exemption for new residents earning over EUR 55,000 (existing incentive, unchanged)

The reform actually made some things better: higher tax-free threshold, family deductions, abolished stamp duty, and the 8% crypto rate provides clarity where there was none.

For a comprehensive comparison of Cyprus taxes versus other popular relocation destinations, use our tax comparison tool or explore our country comparisons.

Cyprus Taxes 2026: Full Overview

Cyprus Non-Dom Status 2026

Cyprus Company Formation 2026

Source: Cyprus Tax Department , 2026 Tax Reform Official

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Cyprus Capital Gains Tax

Cyprus Crypto Tax 2026 (New 8% Rate)

Cyprus IP Box Regime

Cyprus Holding Company

Cyprus VAT

What are the main changes in Cyprus tax law coming in 2026?

The most significant change is the increase in the corporate tax rate from the previous 12.5% to the new 15% minimum rate, aligned with the OECD global minimum tax (Pillar Two) framework. This affects all Cyprus-registered companies from the 2024 tax year onwards. The non-dom regime, capital gains exemptions and dividend withholding tax exemptions remain in place, preserving Cyprus's attractiveness for international structures and individuals.

How does the OECD global minimum tax affect Cyprus companies?

Under Pillar Two, multinational groups with consolidated revenues above 750 million euros must pay a minimum effective tax rate of 15% globally. Cyprus has transposed the EU Minimum Tax Directive, meaning large groups operating through Cyprus entities must ensure their effective rate meets the 15% floor. Most smaller Cyprus companies and individual entrepreneurs are not directly affected by Pillar Two, as the revenue threshold is very high.

Does the 2026 tax reform change the non-dom dividend exemption in Cyprus?

No. The non-dom regime, which exempts qualifying residents from the 17% Special Defence Contribution on dividend income, remains unchanged. Non-dom residents continue to pay only 2.65% GHS on dividends. The reform was narrowly targeted at aligning the corporate tax rate with the OECD minimum, not at changing the personal tax incentives that attract entrepreneurs and remote workers to Cyprus.

Will the new 15% corporate tax rate make Cyprus less attractive than before?

For most business structures, no. The overall tax burden on profits distributed as dividends remains very low: 15% corporation tax plus 2.65% GHS for non-dom shareholders, giving an effective combined rate of around 17-18%. This compares favourably with the UK (25% CT plus 33.75% dividend tax for higher-rate taxpayers), Germany (30%+ effective) and Spain (25% IS plus up to 27% on dividends).

Are there any new incentives introduced in Cyprus for 2026 to offset the rate increase?

Cyprus has expanded the scope of the Intellectual Property Box regime and introduced enhanced R&D deductions under the 2026 reform package. Companies deriving income from qualifying IP assets can benefit from an effective tax rate well below 15% on that income. Additionally, the notional interest deduction on equity has been retained, providing a further offset for equity-funded structures.

How should existing Cyprus company owners respond to the 2026 tax reform?

For most owners of small to medium Cyprus structures, no immediate action is required. The 15% rate was already being applied from 2024, so the reform is not new news operationally. It is worth reviewing your structure with a Cyprus tax adviser to confirm that the effective rate on your specific income streams still meets planning goals, especially if you have IP income, holding structures or are part of a larger group.

What changed in Cyprus tax rates in 2026?

The most significant change is the corporate income tax rate increase from 12.5% to 15%, aligned with the OECD global minimum tax Pillar Two framework. This came into effect for financial years beginning 1 January 2024 onwards. The personal income tax rates and Non-Dom regime (SDC exemption on dividends and interest) remain unchanged. GHS contribution rates also remain at 2.65% on dividends.

Does the OECD 15% minimum tax affect Cyprus companies?

The OECD global minimum tax (Pillar Two, 15% minimum) applies to multinational groups with annual revenue above EUR 750 million. The vast majority of Cyprus companies used by expats and SMEs are below this threshold and are not affected by Pillar Two. For those companies, the standard 15% Cyprus corporate tax rate now coincidentally equals the global minimum, creating no additional burden.

Is Cyprus still a good place to set up a company after the tax reform?

Even at 15% corporate tax, Cyprus remains highly competitive versus other EU countries (Germany 30%, France 25%, Netherlands 25.8%). The Non-Dom dividend regime, extensive treaty network, common law legal system, and EU membership are unchanged. The effective combined tax rate for a Non-Dom owner distributing profits remains approximately 17-18%, which is among the lowest in the EU.

What was the Cyprus corporate tax rate before 2024?

Before the 2024 reform, Cyprus had a corporate income tax rate of 12.5%, which had been in place since 2003. This was the lowest in the EU and attracted significant international business. The rate was increased to 15% to comply with the OECD/G20 global minimum tax initiative. Despite the increase, Cyprus remains among the most competitive corporate tax jurisdictions in the EU.

Are there any new tax incentives in Cyprus in 2026?

Cyprus introduced an enhanced IP Box regime and continues to offer: a 50% income tax exemption for new tax residents earning over EUR 55,000 (first employment in Cyprus), an 80% deduction on qualifying IP income, full exemption on dividends and capital gains from shares (for companies), and the Non-Dom regime for individuals. The government has signalled it will maintain Cyprus's competitive tax position despite the rate increase.

For further reading, see our comparison of the best Cyprus tax resources.

This reform also affects the Cyprus tax filing deadlines for 2026.

A common question that arises is whether Cyprus qualifies as a tax haven.

For a full breakdown of Cyprus corporate tax, IP Box regime, NID and EU comparison, see the Cyprus corporate tax guide 2026.

If this is the direction you are heading in, Book a consultation with our Cyprus tax specialists.

Model your position under the 2026 rules with our free calculators: the Cyprus Salary Calculator uses the updated income tax bands (0% threshold raised to EUR 22,000), the Cyprus Dividend Tax Calculator reflects the 5% SDC reform for domiciled residents, and the Cyprus Crypto Tax Calculator applies the new 8% flat rate on crypto gains.

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