In February 2025, a new tax reform was presented in Cyprus, set to come into effect in 2026. It is important to note that this reform is currently only a set of recommendations, meaning that the text may be subject to amendments or additions.

The primary goal of the reform is to ease the tax burden for all taxpayers, support the middle class through tax relief based on family composition, and introduce various other improvements.

What Will Remain Unchanged?

• Cyprus tax residents will continue to be taxed on their worldwide income (taking into account provisions of Double Tax Treaties (DTTs) and other tax relief measures).
• Retention of tax benefits under the IP-box and Non-Dom regimes.
• The 50% tax exemption for first-time employment in Cyprus will remain.
• The “control” and “address” criteria will continue to be considered as key factors in determining corporate tax residency.
• The capital gains tax provisions will remain unchanged.
• Other existing tax measures will also be retained.

What Changes Are Expected?

1. Personal Income Tax

Adjustments will be made to the income brackets that are tax-exempt and to the thresholds for applying progressive tax rates. The tax rates will be structured as follows:

Additionally, tax deductions will be introduced, including:

• €1,000 per child aged 19 to 21.
• Deductions for students based on income criteria.

2. Special Defence Contribution (SDC)

• The SDC will no longer apply to rental income.
• The dividend tax rate for tax residents and individuals with “domicile” status will be reduced from 17% to 5%.

3. Corporate Tax

The corporate tax rate will increase from 12.5% to 15%.

Introduction of measures to prevent the use of “closed-structure companies”, including: 

• Taxation of shareholders as individuals conducting business activities.
• Adjustment of salaries in accordance with free market conditions.

4. Other Recommendations

• The Non-Dom status duration will remain unchanged, but an extension of the status (i.e., beyond 17 years) may be introduced through an annual fee.
• Expansion of the 60-day tax residency rule to include the Centre of Business Interests (CBI) in Cyprus as a consideration.
• Changes to the legislation on cryptocurrency taxation.
• Lower tax rates on stock options and shares at the moment of realisation.

REVERA’s legal team continues to monitor changes in tax legislation and will keep you updated.

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