The Cyprus Parliament has approved a major tax reform — the first of this scale in decades. The package of laws came into effect on January 1, 2026, affecting individuals, businesses, investors, and strengthening tax control mechanisms.

The reform aims to support households, develop the real economy, and increase the country’s investment attractiveness.

Changes for Individuals

The tax-free threshold has increased from €19,500 to €22,000. The progressive taxation scale has been updated.

New tax deductions are introduced:

  • For children
  • For mortgage interest and rent
  • For “green” home improvements and electric vehicle purchases.

Most tax residents over the age of 25 are now required to file a tax return.

Changes for Businesses and Investors

  • Conditional dividend distribution is abolished for profits earned after January 1, 2026.
  • The defense contribution on actually paid dividends is reduced from 17% to 5%. The defense tax on rental income is completely abolished.
  • The period for carrying forward tax losses is extended from 5 to 7 years.
  • Corporate tax increases from 12.5% to 15%.
  • A new 8% rate applies to income from the sale of crypto assets and approved option schemes.
  • Investment activities of pension funds are exempt from taxation.
  • The limit on deductible entertainment expenses is increased to €30,000.
  • Stamp duty is completely abolished.

Strengthened Tax Control

  • From July 2026, rental payments over €500 must be made only through banks or electronic payments.
  • The Tax Commissioner has the right to request information on assets and liabilities for the past 6 years.
  • Businesses may be sealed and company shares frozen if tax arrears exceed €100,000.

What the Reform Offers

According to the government, the goal of the reform is to create a tax system that better serves families, supports entrepreneurship, and establishes a solid foundation for Cyprus’s economic growth in the coming years.

If you are considering Cyprus as a country to live in, it is important to understand in advance the opportunities that resident status provides.

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