Cyprus Corporate Tax 15% in 2026: What Changed
The Cyprus Parliament approved a comprehensive tax reform package on 22 December 2025, raising the corporate income tax rate from 12.5% to 15% for all Cyprus-resident companies. The new rate applies to fiscal years beginning on or after 1 January 2026.
What Changed and When
For fiscal years ending before 31 December 2025, the headline corporate tax rate remains 12.5%. Companies with a calendar year fiscal period will first pay the 15% rate on their 2026 income, when they file their 2026 tax return.
The rate increase is not solely a Pillar Two requirement. Large multinational groups with global consolidated revenues above EUR 750 million were already subject to a separate Domestic Minimum Top-Up Tax (DMTT) effective from 2025. The 15% headline rate now applies to all Cyprus-resident companies regardless of size.
What Else Changed in the Reform Package
The December 2025 legislation introduced several additional changes:
- The Special Defence Contribution (SDC) on actual dividend distributions drops from 17% to 5% for distributions paid from profits earned from 1 January 2026.
- The Deemed Dividend Distribution (DDD) mechanism, which previously imposed SDC on undistributed profits retained over two years, is abolished for periods from 2026 onwards.
- Stamp duty is abolished on most commercial transactions.
- The carry-forward period for tax losses is extended from 5 to 7 years.
- The 120% R&D super-deduction is extended until 31 December 2030.
What Stays the Same
The reform preserved Cyprus's core tax advantages:
- The IP Box regime remains operational. The effective rate moves from 2.5% to 3% as a mechanical result of the higher headline rate - the underlying 80% notional deduction is unchanged.
- The Notional Interest Deduction (NID) on new equity contributions is unchanged.
- The participation exemption on dividends from EU-resident subsidiaries is unchanged.
- Non-Dom status for individual shareholders is unchanged. Dividends to Non-Dom shareholders remain exempt from SDC.
What This Means in Practice
A standard Cyprus trading company with EUR 500,000 of taxable profit will pay EUR 75,000 in corporate tax from 2026, compared to EUR 62,500 under the old rate. For a Non-Dom shareholder, the effective combined rate on distributed profits remains approximately 5% (corporate tax plus 2.65% GESY on dividends, with SDC exempt under Non-Dom status).
Sources: KPMG Tax News Flash, EY Global Tax Alert, PwC Cyprus Tax Reform Update - all published January 2026.