Starting with the 2026 tax year, one of the most extensive tax reforms in recent decades will come into force in Cyprus. The changes will affect both individuals and companies, fundamentally reshaping income declaration rules, taxpayer oversight, and financial transparency. The main objective of the reform is to create a complete picture of economic activity in the country and reduce the shadow economy.
Who Will Be Required to File a Tax Return from 2026
From 2026 onward, all Cyprus tax residents aged 25 to 71 will be required to file a tax return, regardless of income level. Even individuals with no income or income below the tax-free threshold will be obliged to submit a declaration. This rule will apply for the first time to returns filed in 2027.
As a result, thousands of citizens who were previously not required to file tax returns will be brought into the tax system. The state aims to ensure full coverage of the economically active population, including the self-employed, freelancers, and individuals with passive income.
Tax Registration and the Transitional Period
All individuals falling under the new rules must register with the tax authorities and obtain a personal tax identification number. For those who had no income in 2026–2027 and were not previously registered, registration can be completed by the end of 2027 without penalties.
Rental Market Control and Cashless Payments
One of the key changes is the complete ban on cash payments for property rentals. All rental payments must be made exclusively via bank transfers or electronic payment systems. Violating this requirement will be considered a criminal offense, punishable by a fine of up to €5,000 or imprisonment of up to three years. This measure is aimed at combating tax evasion and increasing transparency in the real estate market.
New Rules for Businesses and the Self-Employed
For companies and entrepreneurs, reporting deadlines are changing.
- Tax returns must be submitted by January 31
- Tax payments must be made by July 31
This allows businesses to manage cash flow more effectively while keeping the tax process on track.
At the same time, requirements for small businesses are being eased. The mandatory audit threshold is being raised from €70,000 to €120,000 in annual turnover. Companies with turnover of up to €200,000 will be able to submit reviewed financial statements instead of a full audit, provided certain conditions are met.
Stronger Enforcement and Penalties for Non-Compliance
The Tax Department will receive expanded powers, including the ability to temporarily suspend the operations of businesses that systematically violate tax laws. This applies to cases of unpaid taxes, failure to submit returns, or ignoring official notices.
Before sanctions are applied, there is a multi-stage notification process. However, in cases of repeated violations, authorities may impose a temporary business closure of up to ten days. Breaching a suspension order may result in a fine of up to €30,000 or imprisonment.
Data Transparency and Digital Oversight
Banks and employers will be required to regularly provide tax authorities with information on income, interest, employment, and payments. This will enable the creation of a unified digital monitoring system and significantly reduce tax evasion.
The reform is aimed at modernizing the tax system and increasing transparency and fairness in taxation. While the new rules increase administrative responsibilities, authorities emphasize that they are necessary to ensure economic sustainability and fair distribution of the tax burden.
Experts note that 2026 will be a transitional year, requiring careful preparation by both individuals and businesses, consultations with accountants, and timely compliance with the new obligations.