Insights
Cyprus Tax Reform 2026: What Companies and Founders Need to Know
Cyprus has introduced one of its most significant tax reform packages in recent years. The 2026 changes affect corporate tax, personal tax, shareholder distributions, crypto gains, tax residency, stamp duty, compliance deadlines and enforcement powers.
Cyprus Tax Reform 2026 explained for companies, founders and international groups. Corporate tax, SDC, crypto, IP, compliance and shareholder planning.
Topic
Cyprus Tax Reform
Focus
Companies, founders and international groups
Updated
July 2026
Cyprus has introduced a comprehensive tax reform package effective from 1 January 2026. The changes affect both individuals and companies, but they are particularly important for founders, international groups, holding companies, software businesses, iGaming companies, crypto-related businesses and companies using Cyprus as a regional or operational base.
The reform increases the standard corporate tax rate from 12.5% to 15%, revises personal income tax bands, changes the Special Defence Contribution framework, introduces a special crypto tax regime, abolishes stamp duty and gives the Tax Department stronger compliance and enforcement powers.
At Ignomad, we view the reform as more than a rate change. It is a shift towards a more structured, substance-driven and compliance-focused Cyprus tax environment.
Key Changes at a Glance
From 2026, Cyprus companies and Cyprus tax resident individuals should review the following areas:
Corporate income tax increases from 12.5% to 15%.
Cyprus incorporated companies may now fall within the Cyprus tax residency definition unless a double tax treaty provides otherwise.
Personal income tax bands have been revised, with the tax-free threshold increased to €22,000.
The 60-day tax residency rule for individuals has been amended.
Tax losses can be carried forward for seven years.
Profits from certain crypto-asset disposals are taxed at a flat 8%.
The 120% R&D super deduction has been extended until 2030.
The deemed dividend distribution rules are abolished for profits earned from 2026 onwards.
SDC on actual dividends is reduced to 5% for profits earned from 2026 onwards.
SDC on rental income is abolished.
Stamp duty is abolished for contracts executed from 1 January 2026 onwards.
Corporate tax return and final tax payment deadlines are amended.
The Tax Department receives enhanced enforcement powers.
1. Corporate Tax Rate Increases to 15%
The standard Cyprus corporate income tax rate increases from 12.5% to 15% from 1 January 2026. This applies to Cyprus tax resident companies and should be factored into 2026 pricing, budgets, accounting forecasts and profit distribution planning.
For many international businesses, Cyprus remains competitive within the EU, especially where the group uses Cyprus for substance, management, IP development, commercial operations, holding activities or regulated business support. However, the increase means that companies should review their margins, intercompany agreements, transfer pricing documentation and shareholder extraction strategy.
Impact on IP and software companies
The Cyprus IP Box remains an important planning point for qualifying software and intellectual property businesses. Where the full 80% deduction applies to qualifying IP profits under the modified nexus approach, the new 15% corporate tax rate may result in an effective tax rate of approximately 3%. This depends on satisfying the relevant IP Box conditions, including the link between the qualifying asset, qualifying expenditure and qualifying income.
This makes documentation even more important. Companies should be able to support the ownership of the IP, the development activity, the people involved, the R&D expenditure and the link between the qualifying income and the qualifying asset.
2. Company Tax Residency Rules Expanded
The reform expands the Cyprus company tax residency definition. A company incorporated under Cyprus Companies Law may be treated as Cyprus tax resident unless an applicable double tax treaty provides otherwise.
This is important for groups that previously relied mainly on management and control analysis. Cyprus incorporated companies should review where decisions are made, where directors are based, where board meetings take place, where accounting records are maintained and whether the group has any dual-residency risk.
For international founders, this does not remove the need for real management and control in Cyprus. It increases the importance of having a consistent corporate governance position that matches the tax position of the company.
3. Personal Income Tax Bands Revised
The personal income tax-free threshold increases from €19,500 to €22,000. The revised 2026 bands are:
€0 to €22,000: 0%. €22,001 to €32,000: 20%. €32,001 to €42,000: 25%. €42,001 to €72,000: 30%. Over €72,000: 35%.
These changes may reduce the personal tax burden for employees and should be considered when reviewing payroll, remuneration packages and founder salaries.
The reform also introduces or updates deductions connected to dependent children, students, primary residence loan interest, green incentives and certain insurance premiums. These deductions are subject to income thresholds and conditions, so they should be reviewed on a case-by-case basis.
4. 60-Day Tax Residency Rule Amended
The 60-day Cyprus tax residency rule has been amended. The condition requiring an individual not to be tax resident in another state has been removed.
This is relevant for internationally mobile founders, directors, consultants and high-net-worth individuals who spend time across multiple jurisdictions. The change may improve access to Cyprus tax residency, but it does not remove the need to review day counts, employment or business links, permanent home requirements and treaty tie-breaker rules.
5. Certain Crypto-Asset Gains Taxed at 8%
A flat 8% tax applies to profits from certain disposals of crypto-assets, including sale, exchange, donation and the use of crypto-assets as a means of payment.
The exact treatment depends on the nature of the activity, the way the crypto-assets were acquired and the supporting documentation. Businesses and individuals dealing with crypto-assets should review their wallet records, transaction history and accounting treatment carefully.
6. Loss Carry Forward Extended
The period for carrying forward tax losses is extended from five years to seven years.
This is a positive development for start-ups, technology companies, iGaming operators, software developers and companies with significant early-stage development or licensing costs. It gives businesses a longer window to utilise tax losses once the company becomes profitable.
7. R&D Super Deduction Extended Until 2030
The 120% super deduction for qualifying R&D expenditure has been extended until 2030. This is particularly relevant for software development, technology platforms, product development, gaming technology, AI tools, data systems and innovation-driven businesses.
Companies claiming R&D deductions should maintain clear records of development work, invoices, employment costs, technical documentation and the commercial purpose of the expenditure. Where the IP Box is also considered, the interaction between R&D deductions and IP Box rules should be reviewed carefully.
8. Special Defence Contribution Changes
The Special Defence Contribution framework has been substantially revised.
For profits earned from 2026 onwards, the deemed dividend distribution rules are abolished. This removes the automatic deemed distribution mechanism that historically applied where companies did not distribute a required portion of profits within the relevant timeframe.
For profits earned from 1 January 2026 onwards, SDC on actual dividends is reduced from 17% to 5%, subject to the shareholder’s Cyprus tax residence and domicile status. Dividends relating to profits earned before 2026 may still be subject to transitional rules and should be reviewed separately. SDC on rental income is abolished and rental income is now subject only to income tax. For companies, interest income is subject to corporate income tax and no longer subject to SDC.
This is one of the most important parts of the reform for Cyprus resident and domiciled shareholders. It creates more flexibility for profit retention and dividend planning, but companies should still review the transitional rules for profits earned before 2026.
9. Defensive Withholding Tax on Low-Tax Jurisdictions
A 5% withholding tax may apply to dividends paid by Cyprus companies to companies in low-tax jurisdictions, subject to the conditions of the rules. Separate treatment may apply where payments involve EU-blacklisted jurisdictions.
International groups should review offshore holding companies, dividend flows, treaty positions and shareholder jurisdictions before making distributions.
10. Stamp Duty Abolished
The Stamp Duty Law is abolished for contracts executed on or after 1 January 2026. This simplifies the execution of many commercial agreements, including service agreements, licensing agreements, intra-group agreements, loan agreements and other business contracts.
For Cyprus businesses, this is a practical improvement. However, it does not reduce the need for properly drafted agreements, transfer pricing support, commercial substance and correct accounting treatment.
11. Capital Gains Tax Updates
The reform increases several Capital Gains Tax lifetime exemptions, including the general exemption, agricultural land exemption and primary residence exemption.
It also widens the definition of immovable property to capture certain share disposals where at least 20% of the value derives from Cyprus real estate. This means that share transfers involving companies with Cyprus real estate value should be reviewed before completion.
12. Compliance and Filing Changes
The reform also introduces important compliance changes.
From tax year 2026, the corporate tax return and final balancing tax payment are due by 31 January of the second year following the relevant tax year. For example, the 2026 corporate tax return and final balancing payment deadline is 31 January 2028. This should be distinguished from provisional tax instalments, which remain a separate obligation.
All Cyprus tax resident individuals aged 25 to 71 are required to submit a personal income tax return. Individuals outside this age range may still be required to file where they have taxable income.
Rent payments above €500 must be made electronically, meaning through bank transfer, card or another approved electronic method. Cash payments above this threshold should be avoided.
13. Stronger Tax Department Enforcement Powers
The Tax Department receives stronger enforcement powers, including the ability to suspend business operations in certain cases where tax returns are not filed, taxes are not paid or invoices and receipts are not properly issued.
Directors may also remain liable for actions or omissions that occurred during their term, even if they resign before proceedings begin.
For companies, this means that tax compliance can no longer be treated as a year-end exercise only. Ongoing bookkeeping, invoicing, payroll, VAT, tax filings and record keeping should be managed consistently throughout the year.
What the Cyprus Tax Reform Means for International Businesses
The 2026 reform does not remove Cyprus’ attractiveness as an EU business base. However, it changes the way companies should use Cyprus.
The strongest Cyprus structures going forward will be those with real substance, clear agreements, accurate accounting, documented management and control, appropriate transfer pricing and a clear commercial reason for being in Cyprus.
For technology, software and iGaming businesses, Cyprus remains relevant for:
IP ownership and software licensing structures
EU-based management and substance
Payment and banking support
Holding company structures
Cross-border service provision
Employment and founder relocation
Regulated or licensing-related operations
Group accounting and tax coordination
The key point is that Cyprus should be used as a real business platform, not just as a low-tax jurisdiction.
How Ignomad Can Assist
Ignomad assists founders, technology businesses, iGaming operators and international groups with Cyprus corporate and tax structuring from a practical perspective.
We can assist with:
Review of Cyprus company structures after the 2026 reform
Corporate tax and shareholder distribution planning
IP Box and software licensing structuring
Corporate governance and management and control support
Transfer pricing coordination
Accounting and audit coordination
Banking and payment provider onboarding support
Review of intercompany agreements and commercial flows
Compliance readiness for Cyprus companies and international groups
Review Your Cyprus Structure for 2026
The Cyprus Tax Reform 2026 creates opportunities, but it also increases the importance of correct implementation.
Companies should review their tax position early, especially where they operate internationally, hold IP, pay dividends, receive royalties, deal with crypto-assets, use offshore shareholders or rely on Cyprus for management and substance.
Speak with Ignomad to assess how the Cyprus Tax Reform 2026 may affect your structure, tax position and compliance obligations.
FAQ
What is the new corporate tax rate in Cyprus from 2026?
From 1 January 2026, the standard Cyprus corporate income tax rate is 15%, increased from 12.5%.
Is Cyprus still attractive after the corporate tax increase?
Yes. Cyprus remains competitive for companies with real substance, especially technology companies, software businesses, IP structures, holding companies and international service groups. The reform increases the need for proper planning and documentation.
What happens to the Cyprus IP Box after the reform?
The Cyprus IP Box remains available. Where the full 80% deduction applies to qualifying IP profits under the modified nexus approach, the new 15% corporate tax rate may result in an effective tax rate of approximately 3%. This depends on satisfying the relevant IP Box conditions.
Has deemed dividend distribution been abolished?
Yes, deemed dividend distribution is abolished for profits earned from 2026 onwards. Transitional rules may still apply to earlier profits.
What is the SDC rate on dividends from 2026?
For profits earned from 1 January 2026 onwards, SDC on actual dividends is reduced from 17% to 5%, subject to the shareholder’s Cyprus tax residence and domicile status. Dividends relating to profits earned before 2026 may still be subject to transitional rules and should be reviewed separately.
Is stamp duty still payable in Cyprus?
Stamp duty is abolished for contracts executed on or after 1 January 2026.
Are crypto gains taxed in Cyprus from 2026?
Certain profits from the disposal of crypto-assets may be subject to a flat 8% tax. The exact treatment depends on the nature of the activity, the way the crypto-assets were acquired and the supporting documentation.
Should existing Cyprus companies review their structure?
Yes. Existing Cyprus companies should review their corporate tax exposure, shareholder structure, management and control, agreements, accounting treatment, dividend policy, transfer pricing and compliance obligations under the new rules.
START WITH THE FACTS
Review your Cyprus structure for 2026
Speak with iGnomad to assess how the Cyprus Tax Reform 2026 may affect your structure, tax position and compliance obligations.