The Cyprus 2026 Tax Reform (pending approval) modernizes the system with these key shifts:

• Corporate: Rate increases to 15% (from 12.5%); Dividend tax drops to 5% (from 17%).

• Personal: Tax-free threshold raised to €20,500; new tax credits for families and students.

• Crypto: New flat 8% tax on profits from disposal/exchange.

• Real Estate: Rental SDC abolished; property swaps are now tax-free.

• Compliance: Mandatory tax returns for all residents over 25; stricter powers for the Tax Commissioner to seal non-compliant businesses.

1. Taxation of Provident & Pension Funds Funds tax-exempt for 20+ years; no EU pressure to change. 29 of 36 OECD countries don't tax fund returns. Unfair to employees, civil servants, and lower-income earners. Hurts long-term savings and Cyprus's fund industry competitiveness.

2. Corporation Tax Increase (12.5% → 15%) Justified as offsetting SDC dividend reduction (17% → 5%), but the OECD Pillar Two argument is misapplied — Pillar Two only affects MNEs with €750M+ revenue (<2% of Cyprus companies). Frequent rate changes undermine Cyprus's stability as an international financial centre.

3. Excessive Tax Commissioner Powers Proposed powers (suspending operations, seizing shares, blocking property transfers) bypass court oversight. Risks legal uncertainty and damages Cyprus's prestige. Better solution: faster, more efficient courts.

Bottom line: Reform is generally a positive step, but these 3 areas need reconsideration to preserve Cyprus's competitiveness as an international financial centre.

Cyprus tax residents are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. Non-tax residents are only taxed on their income accrued or derived from sources in Cyprus. An individual is tax resident in Cyprus if he spends in Cyprus more than 183 days in any one year.

Cyprus tax residents are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. Non-tax residents are only taxed on their income accrued or derived from sources in Cyprus. Certain types of income are subject to SCD
(See article on the taxation of investment income https://shiakas.com/taxation-of-cyprus-investment-income/)