Cyprus 2026 Tax Reform: What Changed

Cyprus has introduced its most significant tax overhaul in over two decades. The reform legislation was passed by the House of Representatives on 22 December 2025, published in the Official Gazette on 31 December 2025, and applies from 1 January 2026. Below is a plain-English summary of the changes that matter most to companies and individuals.

Corporate income tax rises to 15%

The corporate income tax rate increases from 12.5% to 15%, aligning Cyprus with the OECD global minimum tax framework. This applies to profits from 1 January 2026 onwards, so it first affects the 2026 tax year.

Deemed Dividend Distribution abolished

The Deemed Dividend Distribution (DDD) rules are abolished for profits earned from 1 January 2026. As a transitional measure, DDD continues to apply to undistributed profits of 2024 and 2025, up to 31 December 2027. This is a welcome simplification for Cyprus companies and their shareholders.

Lower tax on dividends

The Special Defence Contribution (SDC) on dividends for Cyprus tax resident and domiciled individuals is reduced from 17% to 5%, for dividends paid out of profits earned from 1 January 2026. Dividends paid out of profits earned up to 31 December 2025 remain subject to 17% if received on or before 31 December 2031. Non-domiciled individuals continue to be exempt from SDC on dividends.

SDC on rental income abolished

SDC on rental income is abolished from 1 January 2026. Rental income remains subject to personal income tax (and, where applicable, GHS contributions), but the additional SDC layer on rents no longer applies.

Personal income tax: higher tax-free threshold

The tax-free threshold for individuals rises from €19,500 to €22,000. The income bands above that are taxed progressively up to a top rate of 35%. The reform also introduces and updates a number of targeted allowances (for example for families and housing). For the full up-to-date bands and allowances, see our Income Tax (Individuals) page.

Incentives for relocating and returning to Cyprus

The reform retains and refreshes the incentives that make Cyprus attractive for international talent, including the 50% exemption for higher-earning new residents and a dedicated incentive for individuals repatriating to Cyprus. Combined with non-domiciled status and the 60-day tax residency rule, Cyprus remains one of Europe's most efficient destinations for relocation. See our Relocating to Cyprus and Non-Domiciled Status pages for detail.

New filing and payment deadlines

For companies and individuals who prepare accounts, both the tax return submission and the final self-assessment tax payment now fall due on 31 January of the second year after the tax year (T+2). For the 2026 tax year, that means 31 January 2028 — replacing the previous 31 March filing and 1 August payment dates. This is an important change for cash-flow planning.

What this means for you

Whether you run a Cyprus company, hold investments here, or are considering relocating, the 2026 reform changes both your tax cost and your compliance calendar. Elsavco Audit & Tax can review your position, recalculate your provisional and final tax under the new rules, and make sure you meet the new deadlines.

Get in touch on +357 22 811 900 or info@elsavco.com.

This article is a general summary for information only and reflects our understanding of the Cyprus tax reform in force from 1 January 2026. It is not tax advice; please contact us for advice on your specific circumstances.