Taxation in Cyprus has undergone major changes to comply with the international guidelines, such as the OECD Pillar 2 and EU Unshell (ATAD 3) directives. Regardless of the reforms, Cyprus remains one of the lowest-tax jurisdictions in the European Union and continues to attract investors from all over the world. The country offers an ideal environment for businesses to expand internationally without a heavy tax burden. Whether you are an existing business or getting started with Cyprus company incorporation, having the working knowledge of tax reforms can be advantageous. To better understand it, let’s take a deep dive into the latest Cyprus tax system.
What are the Significant Changes in Cyprus Taxes?
Taxation in Cyprus has undergone an overhaul after the implementation of the latest reforms. Here are the key changes you must know about:
Tax Residency
Cyprus has updated its tax residency requirements for firms incorporated in the country and for individuals who reside in the country for 60 days.
Before the reforms, Cyprus only aligned with the management-control rule. That means the entities that were actively managed in Cyprus were considered residents. Moreover, individuals could not be tax residents in any other country to be eligible for the Cyprus 60-day tax residency.
After the January 2026 reforms, every company registered in Cyprus is a tax resident of the country. However, the mutual agreement between two countries (Cyprus & other countries) due to applicable double tax treaties (if any) can still impact the actual residency of the firm. Moreover, the reforms also allow a person to be a tax resident elsewhere and still be eligible for the 60-day rule.
Income Tax Rate
There are significant changes in tax rates after the reforms; for example, the corporate tax rate in Cyprus has increased from 12.5% to 15%. Personal income tax criteria have also changed. Additionally, the tax-exempt threshold has increased from EUR 19000 to EUR 22000. Aside from this, the government has also increased personal tax bands in Cyprus.
Taxes on Cryptocurrency-Related Profit
Profits from Crypto trading are taxed at a flat 8%. However, this does not include profits from crypto mining, which are taxed at the standard corporate or personal income tax rate. Aside from this, losses on Crypto can be carried forward for just one year.
Tax Relief
The limit to carry forward the losses has been extended from 5 years to 7 years, making it easier for firms to offset losses. This tax relief applies to all tax-resident companies in Cyprus.
Abolition of Deemed Dividend Distribution (DDD)
Before the reforms, companies had to pay dividends to shareholders mandatorily. This has been abolished in the current regime. Now, companies can retain profits and re-invest in the firm.
Abolition of Stamp Duty
Stamp duty has been abolished completely after the latest reforms. However, documents drafted and signed before Dec 31, 2025, remain subject to stamp duty as per the old law.
Collection of Taxes
Tax authorities can freeze an individual’s corporate ownership if the tax due exceeds EUR100k and the payment deadline has passed. Thus, without the consent of the tax department, one cannot sell or transfer the shares (corporate ownership).
Submission of Financial Statements
Partners in a partnership firm must file the annual tax return with the Tax Commissioner. The return must also include the names and addresses of the other partners and their income shares.
Tax Objections
Under the old system, the deadline was always the last day of the month following the month when the tax bill was received. Since the months have different lengths, the actual time to object was never fixed. For example, if a tax bill is received on January 2, a person has approximately 60 days to object. On the other hand, if the bill was received on January 28, then there are only 30 days to object. This created a disparity between the taxpayers.
The reforms have extended the tax objection timeline to 60 days for everyone regardless of the when the tax bill is received.
