22/12/2025
📢The Plenary of the House of Representatives has approved today the first comprehensive reform of the Cyprus tax system since 2002, introducing significant changes to corporate taxation, incentives, and anti-evasion measures.
The measures are subject to official publication of the law in the Official Gazette.
Key measures and changes include:
CORPORATE MEASURES
· Corporate tax rises to 15% from 12.5%;
· Special Defence Contribution (SDC) on dividend distributions will drop sharply from 17% to 5% for profits earned after 1 January 2026;
· Abolishment of the stamp duty;
· Abolishment of deemed dividend distribution for profits earned after 1 January 2026;
· Removal of the special defence contribution on rental income;
· Extension of the loss carry-forward period from five to seven years;
· The 120% super-deduction for research and development expenses of an intangible asset is extended until 2030;
· The maximum limit of entertainment expenses deductible for tax purposes is increased to €30,000, from €17,086;
· Increase of the tax-free threshold on capital gains to €30,000
ANTI-TAX EVASION MEASURES
· Mandatory payment of rent over €500 via bank transfer or electronic payment from 1 July 2026;
· The Tax Commissioner will be able to request the submission of a statement of assets and liabilities covering a period of six years and the mandatory keeping of data supporting the tax return for six years;
· The Tax Commissioner has also been granted unprecedented enforcement powers, including the ability to seal non-compliant businesses and freeze company shares for debts exceeding €100,000.
PERSONAL TAX CHANGES
· The tax-free allowance is increased to €22,000;
· New tax brackets set rates at 20% for income between €22,001 and €32,000, 25% for €32,001 to €42,000, 30% for €42,001 to €72,000, and 35% above €72,001;
· Introduction of graduated child and student deductions up to age 24. Families receive €1,000 for the first child or student, €1,250 for the second, and €1,500 for the third and subsequent children;
· Introduction of the following additional deductions: €2,000 deductions for performing loan interest and rent, €1,000 for green home investments including electric vehicle purchases, and up to €500 for home insurance premiums against the risk of natural disasters.
