Cyprus has undertaken the most extensive reform in its tax system in more than 20 years. Below you can find the highlights of the tax reform. For all the details you can refer to our dedicated newsfeed.
- Increase of Corporation Tax Rate from 12.5% to 15%
- Tax Losses to be carried forward for 7 years instead of 5 years
- Super deduction of 120% for Research and Development extended to 2030
- Transfer Pricing documentation thresholds increase
- Condition for person not to be a tax resident in another jurisdiction to qualify for 60 days Tax Residency Scheme removed
- As of 2031, the redemption of units in funds that are set up in a corporate form will be considered a dividend, as opposed to being treated as a disposal of securities, which is the current treatment
- Annual tax free threshold for Personal Income Tax increased from €19,500 to €22,000 and bands of tax rates beneficially amended
- Specific provisions are introduced regarding ex-gratia payments
- Family-based allowances have been introduced depending on the size and income of the household
- Cryptocurrency profits (including gains of capital nature) will be taxed at a flat 8% rate
- Stock options granted under approved employer schemes will also be taxed at 8%
- Special Contribution for Defense (SCD) on divided income to Cyprus tax resident and domiciled individuals reduced from 17% to 5%. Dividend income received from abroad by Cyprus tax resident companies will be subject to 5% SCD instead of 17% so far, in case the relevant exemption conditions are not met
- Withholding tax on dividend payments made to associated companies in low-tax jurisdictions decreases from 17% to 5%
- Deemed Dividend Distribution on profits generated after 31 December 2025 is abolished
- SCD on rental income is eliminated for both businesses and individuals
- SCD on passive interest income for companies is eliminated – interest income will only be subject to Corporation Tax. Income Tax for active interest income for individuals is eliminated – interest income will only be subject to SCD for individuals
- Increase in lifetime exemption thresholds for Capital Gains Tax
- Threshold for property-rich companies for Capital Gains Tax purposes reduced from 50% of the value to 20% of the value of a company
- Deadline for submission of Corporation Tax Return to be 13 months after the end of the tax year instead of 15 months which was the case so far
- The deadline for final payment of Corporation Tax to be the same as the submission deadline. So far the final payment was due within eight months from the end of the tax year
- Stamp Duty has been abolished
