The Cyprus Parliament approved on 22 December 2025 a tax package, introducing the most extensive tax reform in the tax system of Cyprus in over two decades, with changes taking effect on 1 January 2026. A brief summary of the main changes introduced is presented below.
For what concerns businesses, the Corporation Tax rate will rise from 12.5% to 15%. However, businesses will benefit from the complete abolition of the deemed dividend distribution system and a sharp cut in Special Contribution for Defense on actual dividend payments from 17% to 5%.
The 120% super-deduction for research and development on intangible assets is extended until 2030.
Profits from the disposal (sale, exchange, gift) of crypto assets will be subject to a flat 8% tax. Losses can only offset crypto gains within the same tax year.
Stock options granted under approved employer schemes will also be taxed at a flat 8% rate, whilst gratuity payments will be subject to 20% taxation with €200,000 tax-free when granted due to employment termination.
The tax deduction for entertainment expense increases from €17,086 to €30,000.
The period for carrying forward losses is extended from 5 to 7 years.
For individuals, the tax-free threshold increases from €19,500 to €22,000, with tax brackets adjusted as follows:
- Up to €22,000: 0%
- €22,001 to €32,000: 20%
- €32,001 to €42,000: 25%
- €42,001 to €72,000: 30%
- Above €72,001: 35%
Families will receive significant new allowances: €1,000 per parent for the first child, €1,250 for the second child, and €1,500 for the third and subsequent children. Homeowners and renters gain €2,000 deductions for loan interest and rent payments. Green home investments and electric vehicle purchases qualify for €1,000 deductions, whilst home insurance against natural disasters brings up to €500 off taxable income.
Special Contribution for Defense on rental income is eliminated for both businesses and individuals.
Furthermore, the tax-free threshold on capital gains will increase to €30,000, with agricultural plot sales exempt up to €50,000.
Stamp Duty will be eliminated.
An extensive analysis of the changes will follow after the holidays.
