On 22 December 2025, the Cyprus House of Representatives approved a series of amendments to Cyprus tax legislation, collectively referred to as the Cyprus Tax Reform. The new provisions became effective on 1 January 2026.
Outlined below is a summary of the key changes resulting introduced by the Tax Reform:
Corporation Tax
The corporation tax rate has been increased to 15%, from the previous rate of 12.5%
Special Defence Contribution (SDC) on Dividends
The SDC rate on dividends has been reduced to 5%, from 17%. It is noted that the reduced rate applies to distributions of dividends from the profits of the years 2026 and onwards. Dividends distributed from the profits of years 2025 and earlier are subject to the previous rate of 17%.
SDC on dividends only applies to Cyprus domiciled individuals. Non-domiciled individuals remain exempt from SDC on dividend income.
Deemed Dividend Distribution (DDD)
The Deemed Dividend Distribution provisions have been abolished for profits generated from the year 2026 onwards.
Special Defence Contribution (SDC) on rental income
The SDC on rental income has been abolished. Previously, SDC was imposed at a rate of 3% on 75% of the gross rental income.
Personal Income Tax – Revised Tax bands
The personal income tax bands have been adjusted upwards as follows:
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Tax Rate
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New Income Tax Bands (from 2026)
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Previous Income Tax Bands (up to 2025)
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0%
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€0 – €22,000
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€0 – €19,500
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20%
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€22,001 – €32,000
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€19,501 – €28,000
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25%
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€32,001 – €42,000
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€28,001 – €36,300
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30%
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€42,001 – €72,000
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€36,301 – €60,000
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35%
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€72,001 and higher
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€60,001 and higher
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Personal Income Tax – Tax reliefs
The new legislation introduces new tax reliefs on personal taxable income including reliefs based on the number of children per family.
The new legislation introduces new tax reliefs on personal taxable income including reliefs based on the number of children per family.
Personal Income Tax – Administration
All Cyprus Tax residents that are over 25 years old must annually submit an Income Tax Return.
Taxation of Digital Assets
An 8% tax rate has been introduced on profits arising from the disposal of digital assets.
Capital Gains Tax (CGT):
Increase of the lifetime CGT exempt gain to €30,000, from €17,086.
This article is intended to provide a high level summary of the principal tax changes introduced by the Cyprus Tax Reform 2026, as approved by the Cyprus House of Representatives and published in the Cyprus Official Gazette on 31 December 2025.
The summary does not consider any subsequent administrative guidance, circulars, or interpretations that may be issued by the Cyprus Tax Department as part of the implementation of the new legislation.
KSA Team
