In 2026, Cyprus is introducing a substantial number of noticeable tax changes as part of one major comprehensive reform. It affects absolutely everyone: both individuals and legal entities. It is worth familiarising yourself with the new rules now, because in 2027 income will have to be declared under the new rules and using the new figures.
What has changed in Cyprus taxes
A new tax year began on 1 January 2026, and all changes will apply to income and charges relating to this period. It is important not to confuse the timing: tax returns for 2025 that are filed in 2026 are not yet covered by the changes. The reform will affect all Cyprus tax residents in one way or another. The main changes include:
- changes to the thresholds in the progressive income tax scale;
- an increase in corporate tax;
- broader eligibility for deductions, with new deductions introduced;
- abolition of all stamp duties (not technically a tax, but closely related);
- changes to Special Defence Contribution on dividends and rental income;
- new VAT rules for the purchase of a first property for owner-occupation;
- different Special Defence Contribution rates;
- cryptocurrency income placed in a separate category and subject to a separate tax rate;
- a full transition to Tax For All;
- an expansion of the scope of capital gains tax;
- mandatory filing of a tax return even for low or tax-free income.
The list is extensive, making it clear that everyone should familiarise themselves with the new rules and rates, not only company owners in Cyprus.
Taxes for individuals: rates, thresholds and deductions
It is worth starting with the fact that for the 2026 tax year, even residents with zero income or income low enough to be tax-free will have to submit a tax return. This applies to people who were aged 25–71 during the tax year. The Cyprus authorities believe this approach will make it possible to keep more accurate records and better monitor the financial situation on the island.
New thresholds and rates
The progressive tax scale is changing:
- under €22,000 — 0% tax;
- €22,001–32,000 — 20% tax;
- €32,001–42,000 — 25% tax;
- €42,001–72,000 — 30% tax;
- over €72,000 — 35% tax.
It is worth remembering that total annual income is taken into account, including salaries, pensions and rental income. A foreign pension can either be included in total income or treated separately under a so-called flat rate of 5%. Separate taxation is available if the annual amount exceeds €5,000.
VAT on a first property
In June 2026, the previous reduced-rate period ended and a new relief began to apply:
- the property must cost no more than €350,000;
- the property must be new;
- the property must be purchased for personal use rather than rental;
- the property must be the buyer’s first real estate asset in Cyprus;
- the applicant must not have used the reduced VAT rate during the previous 10 years — this is very important, as the relief can only be used once per decade;
- 5% VAT is paid on the first 130 m2, while the remaining square metres are taxed at the full 19% rate.
It is important to know that the total transaction value must not exceed €475,000. This effectively acts as a kind of luxury threshold.
New tax return platform: Tax For All
In 2027, all taxpayers will be moved to the unified Tax For All portal. Accordingly, tax returns will also be filed through it. The portal can already be used to obtain a TIC (Cyprus tax identification number), register as a taxpayer and carry out certain transactions, such as paying VAT.
New tax deductions
Cyprus has decided to encourage higher birth rates and support people who invest in environmentally friendly measures. As a result, three new deductions have been introduced:
- For children. If a family earns less than €100,000 per year, while larger families earn up to €150,000 per year (or up to €200,000 for families with 5 or more children), they are entitled to a deduction of €1,000 for the first child, €1,250 for the second, and €1,500 for the third and each subsequent child. Single parents must have annual income of no more than €40,000, but their child deductions are doubled. Income includes salaries, pensions and other earnings, while subsidies, scholarships and similar state support are excluded.
- For “green” investment. If a family decides to improve the environmental sustainability of its lifestyle, a deduction of up to €1,000 per person per year is available. Eligible measures include upgrading a home to improve energy efficiency, such as installing solar panels, energy storage systems and similar equipment, as well as purchasing a new electric vehicle.
- For housing. Up to €2,000 can be deducted if an apartment or house is rented or a mortgage is being paid. For mortgages, the deduction is based not on the total payments, but only on the interest.
Important! Failure to submit a return or pay taxes on time may result in penalties starting from €100 and potentially higher, sometimes with additional interest charges.
Ban on paying rent in cash
From 1 July 2026, receiving rent payments from tenants in cash is prohibited. Payments may only be received by card, bank transfer or through approved payment systems. This change is not directly a tax measure, but it is intended to make tax regulation more transparent.
Dividends, interest, rental income and other income: what has changed
Dividends
One of the most noticeable changes concerns the Special Defence Contribution (SDC), commonly referred to as the defence contribution. From 1 January 2026, the SDC rate for individuals on dividends paid out of profits earned strictly after 1 January 2026 has been reduced from 17% to 5%. This applies only to companies located in low-tax jurisdictions.
The Deemed Dividend Distribution (DDD) rule on deemed distributions has been abolished. Dividends will now be subject to the defence contribution at the rate indicated above. At the same time, 70% of profits are treated as distributed after 2 years.
Attention! The Special Defence Contribution, or SDC, is paid only by residents with domicile status. Non-domiciled residents remain exempt from this contribution.
Rental income
Rental income is no longer subject to SDC. It is included in the total income of an individual or legal entity and taxed accordingly, while a GESY contribution is also calculated on it.
Cryptocurrency
Any cryptocurrency transaction that results in a profit will be treated as a disposal and will therefore trigger a tax liability. In 2026, realised cryptocurrency gains will be treated separately from total income and taxed at a rate of 8%.
What counts as a disposal:
- exchanging cryptocurrency for fiat currency such as euros, dollars and others;
- exchanging it for another cryptocurrency;
- using cryptocurrency to buy goods or equipment.
You can read more about which operations are treated as disposals and which are not in our article.
What has changed for companies and entrepreneurs
Legal entities will also be affected by Cyprus’s tax reform. The most important change is the increase in corporate tax from 12.5% to 15%. Even so, this rate remains lower than in many other European Union countries.
Important! From 2026, companies registered in Cyprus become tax residents regardless of whether they are also recognised as tax residents of another country. Exceptions may apply only where a double taxation agreement provides otherwise.
The capital gains tax (CGT) rate in Cyprus remains unchanged at 20% in 2026, but its scope is expanding. The tax may now apply not only to the direct sale of Cyprus property, but also to certain transactions involving shares in companies linked to such property.
The change is that the relevant threshold has been reduced from 50% to 20%. In other words, if at least one fifth of the market value of the shares being sold is directly or indirectly attributable to Cyprus real estate, the transaction may be subject to capital gains tax.
It is also worth noting a change to filing deadlines for the 2026 tax year for entrepreneurs and self-employed individuals. Given the scale of the reform, the authorities have allowed them to file later, namely by 31 January 2027.
New tax administration rules: Tax For All
The authorities are gradually moving all taxpayers to a single system called Tax For All (TFA). This should be convenient for everyone, as tax records and payments will be handled through the same platform.
Tax For All is already used for a number of procedures: it can be used to obtain a personal TIC tax number, register for VAT payments and handle certain other taxes for legal entities. From 2027, TFA will also be used by individuals, and tax returns for 2026 will have to be filed exclusively through it.
Note! TAXISnet will cease to be relevant at the end of the 2026 tax year. At present, it can still be used to declare taxes only for 2025.
A significant number of changes were introduced to Cyprus tax legislation in 2026. In practice, Cyprus has taken this area much more seriously, as the European Union is demanding ever greater transparency not only from citizens of the Republic, but also from foreigners who are connected with it in one way or another — especially property buyers and business owners.
For individuals, most of the changes are fairly straightforward and should not be too difficult to understand independently, especially if this is not their first tax year in Cyprus. Legal entities, particularly those with domicile status, would be better advised to consult a specialist or work with an experienced accountant who can bring all documentation into line with the new rules. Their services are likely to cost far less than paying a penalty for an error or missed deadline.
Read also:
