Cyprus Launches Major Tax Reform from January 1, 2026

The Government of the Republic of Cyprus has submitted to Parliament a package of six bills forming a comprehensive reform aimed at reducing the tax burden for individuals and businesses while enhancing control over tax compliance. This reform is not just a technical adjustment but a strategic overhaul of the entire tax system, focused on fairness, transparency, and sustainable economic growth.

Its main goal is to create a “fair, efficient, and socially responsible tax system” — one that supports households and attracts investment, while strengthening Cyprus’s reputation as a competitive and transparent financial center.

New Income Tax Rates for Individuals

From 2026, Cyprus will introduce updated personal income tax brackets that significantly reduce the burden on the middle class:

1. Up to €20,500 — 0%
2. €20,501–30,000 — 20%
3. €30,001–40,000 — 25%
4. €40,001–80,000 — 30%
5. Over €80,000 — 35%

Additional tax deductions will apply for families, young people, and environmentally responsible citizens:

1. €1,000 deduction per child, or €2,000 for single parents.
2. Housing costs (rent or mortgage on a primary residence) up to €1,500 per year and investments in home energy efficiency or electric vehicle purchases up to €1,000 will reduce taxable income.

These benefits apply to families with annual income up to €80,000 (or €100,000 for families with more than three children) and to single individuals earning up to €40,000.

Support for Pensions and Insurance

The reform encourages private savings and insurance schemes:

1. Life insurance premiums deductible up to 7% of coverage amount.
2. Pension contributions deductible up to 10% of income.
3. Medical expenses deductible up to 2%.
4. A new €500 deduction for home insurance against natural disasters.

Digital Economy and Cryptocurrency Taxation

Cyprus will become one of the first EU countries to introduce clear tax rules for digital assets and cryptocurrencies.

Under new Article 20E, profits from the sale of crypto assets will be taxed at 8%, with losses deductible only within the same tax year.

Income from stock options will also be taxed at 8%, provided the program is approved by the employer.

Executive bonuses exceeding €200,000 will be subject to a flat 20% tax, enhancing transparency in remuneration.

Corporate Tax and Investment Incentives

For companies, the corporate income tax rate will rise slightly from 12.5% to 15%, aligning with global standards. However, several incentives are introduced:

1. 20% extra deduction on capital expenditures made between 2025–2030 (up to €30,000).
2. Up to €300,000 in tax relief over three years for companies newly listed on a stock exchange.
3. 20% discount on agricultural machinery and equipment for farmers.
4. Tax bonuses for companies supporting culture and the arts.

Strengthening Oversight and Combating Tax Evasion

The reform grants the Tax Commissioner expanded powers to combat tax evasion. They will be able to:

1. Freeze shares of companies or individuals owing more than €100,000.
2. Accept real estate as partial repayment for debts exceeding €10,000.
3. Suspend operations of companies with debts over €20,000.

A full digitalization of tax reporting will also be implemented:

1. Mandatory registration in the tax registry from age 25.
2. Electronic filing of all tax returns.
3. Simplified digital access for tax authorities to banking information.

New Penalties and Updated Property Tax Rules

Penalties for violations will increase substantially:

1. Up to €4,000 for companies with turnover above €1 million.
2. Up to €1,000 for individuals.
3. An additional 5% late fee for delays in paying capital gains tax.

Tax exemptions on property sales are expanded:

1. Total tax-free capital gain up to €100,000.
2. €20,000 exemption for regular property sales.
3. €30,000 exemption for agricultural land sales.

A new electronic system for stamp duties will be introduced, with a maximum cap of €20,000 for large transactions — designed to speed up processing and reduce bureaucracy.

A New Era for Cyprus’s Tax System

The 2026 tax reform represents the most ambitious transformation in the history of Cyprus’s fiscal policy.

It aims to lighten the load on citizens, support sustainable business, and attract investment, while enhancing oversight and transparency.

Cyprus is betting on fairness, digitalization, and international competitiveness — the three pillars of the island’s new economic era.