A. Objectives of the Tax Refrom
-
Modernising the Tax System: Replacing outdated, complex, and inefficient local administrative mechanisms.
-
Enhancing Fairness & Social Equity: Enabling a more balanced, transparent, and proportionate allocation of the tax burden.
-
Aligning with Global & EU Standards: Enhancing international compliance, tracking mechanisms, and fiscal transparency.
-
Boosting Competitiveness: Fostering sustainable corporate growth and foreign direct investments through a business-friendly framework.
B. Stamp Duty Law of 1963 (N.19/1963)
The Stamp Duty Law has been completely repealed and is no longer in effect. This structural elimination drastically reduces transactional friction and direct overhead costs for corporate entities and private individuals, allowing for rapid, digital-friendly execution of business transactions.
C. Collection of Taxes Law of 1962 (N.31/1962)
A critical amendment to the Collection of Taxes Law is the addition of Article 9F, which expands the Tax Commissioner's discretionary power to secure unpaid debts when a taxpayer's arrears exceed €100,000 and have remained outstanding for more than 30 days past the official deadline.
Under this new power, the Tax Commissioner is authorized to register a legal memorandum (memo) over the individual's corporate shares as a formal debt security. This security can legally cover up to double the total outstanding amount, inclusive of accruing interests and legal administrative charges.
D. Capital Gains Tax Law of 1980 (N. 52/1980)
The Capital Gains Tax (CGT) framework has undergone significant updates designed to standardize statutory definitions, optimize thresholds, and incentivize regulated asset transactions:
-
Standardized Definition: Aligns 'immovable property' with the Immovable Property (Tenure, Registration, and Valuation) Law to ensure statutory alignment across all Cyprus legislation.
-
Indirect Shareholder Threshold: The valuation threshold triggering CGT on the disposal of shares in companies that hold Cyprus-situated real estate (directly or indirectly) has been significantly lowered from 50% to 20% of the shares' market value.
-
Exemption Thresholds: Revised lifetime exemptions have been dramatically increased to reflect modern valuation standards.
|
Exemption Category
|
Previous Limit
|
New 2026 Limit
|
|
General Lifetime Exemption
|
€17,086
|
€30,000
|
|
Agricultural Land Exemption
|
€25,629
|
€50,000
|
|
Primary Residence Exemption
|
€85,430
|
€150,000
|
Stock Market Share Disposals: To incentivize public market investments, there is zero Capital Gains Tax charged on profits derived from selling shares listed on a regulated stock exchange. For shares listed on unregulated markets, capital gains are fully exempt up to €50,000 per calendar year. Any capital gains exceeding this threshold in a calendar year are taxed at standard rates.
E. Assessment and Collection of Taxes Law of 1978 (N. 4/1978)
The 2026 amendments implement rigorous compliance structures concerning mandatory tax registrations, returns, and transactions:
-
Mandatory Tax Return Filing: Expanded to include: (a) Cyprus residents with gross Article 5(1) income or those aged 25–70 regardless of taxable income, (b) Non-residents with Cyprus-sourced taxable income, (c) All Cyprus-incorporated companies, (d) Non-resident companies with Cyprus-sourced taxable income (excluding those fully covered by withholding taxes).
-
Compulsory Tax Registry: All eligible individuals aged 25 and over must register in the Tax Register. For newly incorporated companies, registration must occur within 60 days of incorporation.
-
Filing Deadlines: The standard annual filing deadline is updated to 31 July. For corporate entities and audit-submitted returns, the deadline is extended to 31 January of the second year following assessment (e.g., tax year 2026 is due by 31 January 2028).
-
Digital Rental Transactions: To enforce traceability and combat undeclared rental income, all rental payments for Cyprus properties must now be completed exclusively via Bank Transfer, Credit/Debit card, or other recognized electronic payment systems.
F. Income Tax Law (118(I)/2002)
To ensure absolute compliance with the OECD's global minimum tax initiatives, the corporate income tax rate has been adjusted from 12.5% to 15%. Additionally, the definition of corporate tax residency has been modernized to remove the restriction that a company must not be tax resident elsewhere, giving absolute focus to management, control, and local substance.
Crypto-Asset Taxation: Profits derived from the disposal of crypto-assets are now taxed at a competitive flat rate of 8%, with a complete statutory exemption for assets generated directly from mining activities.
New Progressive Personal Income Tax Brackets (2026):
|
Taxable Annual Income (€)
|
Tax Rate (%)
|
|
Up to €22,000
|
0%
|
|
€22,001 – €32,000
|
20%
|
|
€32,001 – €42,000
|
25%
|
|
€42,001 – €72,000
|
30%
|
|
€72,001 and above
|
35%
|
Personal Tax Deductions and Allowances: Families are entitled to parent-specific deductions depending on child counts and household income thresholds:
-
Income Cap Limits: €100k for families with 0-2 children; €150k for 3-4 children; €200k for 5+ children; €40k for single-parent households.
-
Deductions Per Parent: €1,000 for the 1st child; €1,250 for the 2nd child; €1,500 for the 3rd and subsequent children.
-
Housing & Green Allowances: Up to €2,000 per parent for primary residence rent/housing loan interest; and up to €1,000 per parent for energy efficiency improvements on primary residences.
Employee Share Schemes: Gains realized by directors and employees from Employee Share Schemes are now subject to an attractive flat tax rate of 8% (capped at a total benefit value of up to twice the individual's annual remuneration from the issuing company).
G. The Special Contribution for the Defence Law (117(I)/2002)
The Special Defence Contribution (SDC) framework has been significantly modified to reduce burdens on local tax-resident and domiciled investors:
-
Dividend Tax Slash: The SDC rate on actual dividend distributions is reduced from 17% to a highly attractive 5% for profits generated from 1 January 2026 onwards.
-
Abolition of Deemed Distribution: The complex Deemed Dividend Distribution rules have been entirely abolished for profits earned after 1 January 2026, facilitating easy, long-term capital reinvestment.
-
Abolition of SDC on Rent: The SDC levy on rental income has been completely abolished, removing double exposure for property investors.
KINANIS LLC
Lawyers’ Limited Company
Law | Tax | Accounting | Consulting
12 Egypt Street, 1097 Nicosia, Cyprus
Tel: + 357 22 55 88 88 Fax: + 357 22 75 97 77
E-mail: FinancialServices@kinanis.com
Website: https://www.kinanis.com
This article is brought to you by Finhub, a marketplace for professional services in Cyprus. Finhub connects businesses with vetted, reputable, and licensed professionals offering legal, audit, tax, and immigration services.
Through the platform, businesses can easily find service providers tailored to their specific needs. By submitting an enquiry along with their budget and required expertise, they receive competitive offers from qualified professionals—streamlining the process of finding the right partner.
Finhub is trusted by hundreds of businesses relocating to Cyprus, helping them access the right experts for every stage of their relocation journey. Feel free to try it, it is entirely free for businesses. Simply visit www.finhub.com.cy