# Cyprus Tax Reform from 2026: Company, Individual, Crypto-Assets

> The Cyprus reform in force from 1 January 2026: 15% corporate tax, a personal scale with a EUR 22,000 nil band, SDC of 5% on dividends and 17% on interest, 8% on crypto-assets, and the transition for pre-2026 profits.

Author: Alena Dunaeva — Lawyer, Family Office (https://wiki.private.law/en/authors/dunaeva)
Last modified: 2026-09-09T00:00:00.000Z
Canonical: https://wiki.private.law/en/cyprus-tax-reform-2026
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Cite as: Cyprus Tax Reform from 2026: Company, Individual, Crypto-Assets. wiki.private.law. https://wiki.private.law/en/cyprus-tax-reform-2026. Version 28e272665ae1062aa72fd67d998afefd1fbd20e22ab3ec38600e2530a5911ab5.
Topics: investments, structures
Jurisdictions: cyprus
Semantic tags: company, tax-regime

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## Concept

Cyprus rebuilt its tax system through two laws passed on the same day and effective from 1 January 2026. The package moves four separate charges at once — corporate income tax, personal income tax, the special defence contribution and the taxation of crypto-assets — so no single rate describes it. The design reads as follows: the general corporate rate rises to the level of the global minimum, the burden on employment income falls through a higher nil-rate band, the charge on distributing profit to an owner drops from 17% to 5%, and two routes around the system close — personal use of company assets, and crypto-assets, which until the reform had no regime of their own.

Above all of this sits a transitional layer that matters more in practice than the rates themselves. The old rates survive, attached to the year in which the profit was earned. Two distribution regimes therefore coexist on the island until the end of 2031, and the year a profit arose becomes a parameter in every payment decision.

## Two laws, one date

The reform was carried by two acts. [Ν. 244(Ι)/2025](https://www.cylaw.org/nomoi/arith/2025_1_244.pdf) amended the Income Tax Law and [Ν. 245(Ι)/2025](https://www.cylaw.org/nomoi/arith/2025_1_245.pdf) amended the Special Defence Contribution Law. Both were published in the Official Gazette of the Republic of Cyprus, Annex Ι(Ι), No. 5070 of 31 December 2025. Both enter into force on 1 January 2026, with a single exception: paragraph (στ) of section 4 of the income tax amending law takes effect on 1 January 2031.

> ⚠️ External summaries of the reform routinely cite "Law 207(I)/2025". That citation is wrong: the number belongs to a law on inland transport. The reform is 244(Ι)/2025 and 245(Ι)/2025, and the correct citation matters in correspondence with a bank, an adviser or a foreign tax administration.

## The company: rate, losses, distribution

The corporate rate rises from 12.5% to 15%. In the Second Schedule the words "twelve and a half" and the figure "12.5%" are replaced by "fifteen" and "15%". The 12.5% rate had been the island's principal selling point for more than a decade. Holding functions feel the change very little, since incoming dividends and gains on the disposal of securities are exempt in any event; an operating company with real Cyprus profit absorbs it in full. The holding structure is covered separately in [Cyprus Holding: 15% Corporate Tax from 2026](https://wiki.private.law/en/company-cyprus).

Loss carry-forward is extended from five years to seven: in the first proviso to section 13(1) the word "five" is replaced by "seven". This is a meaningful offset to the rate increase for businesses with uneven results — start-ups, development, shipping. Group relief is tightened in the same section: section 13(7) now requires the claimant company to set its taxable income against its own losses of previous years before it can absorb the losses of another group company. The ordering is now fixed.

The IP box rate was not amended directly, but it is a function of the corporate rate: section 9(1)(κ) allows a deduction of 80% of qualifying profits from a qualifying intangible asset, and the remaining 20% is taxed at the general rate. The effective rate rises from 2.5% to 3%. The nexus calculation and the comparison with neighbouring regimes are in [IP Box: The Preferential Tax on Intellectual Property](https://wiki.private.law/en/ip-box).

## The individual: the scale and the defence contribution

The personal income tax scale from tax year 2026 is as follows.

| Taxable income | Rate |
| --- | --- |
| up to EUR 22,000 | 0% |
| over EUR 22,000 up to EUR 32,000 | 20% |
| over EUR 32,000 up to EUR 42,000 | 25% |
| over EUR 42,000 up to EUR 72,000 | 30% |
| over EUR 72,000 | 35% |

The nil-rate band rises from EUR 19,500 to EUR 22,000 and the top band moves from EUR 60,000 to EUR 72,000. The top rate stays at 35%, so the gain is concentrated in the middle of the scale: someone with employment income of EUR 60,000–70,000 pays materially less than under the previous grid, while at several hundred thousand the difference is barely visible.

The special defence contribution is the other half of the picture and carries more of the change.

| Charge | Before 2026 | From 2026 |
| --- | --- | --- |
| Dividends to a resident and domiciled individual | 17% | 5% |
| Interest | 17% | 17% |
| Government and listed debt securities | 3% | 3% |
| Rent | charged | abolished |
| Disguised distribution of dividend | no separate charge | 10% |

The rate on interest is retained at 17%. This is worth stating plainly, because several external summaries assert that the charge on interest was abolished or reduced, and the text of section 3Β does not support that. The reduced 3% applies to savings certificates and development bonds of the Cyprus government or the government of another EU member state, and to corporate debentures, bonds and debentures of a local authority or state organisation listed on a recognised stock exchange. An individual whose total annual income including interest does not exceed EUR 12,000 is entitled to a refund of the withheld contribution above the amount corresponding to 3%.

The defence contribution on rental income is abolished outright: the definitions of rent and finance lease are deleted from the law. Rent remains within income tax and the GeSY health contribution, but the separate defence charge on it is gone.

### The new section 3Α: disguised distribution

In its place comes section 3Α: a resident individual pays 10% on the amount of a disguised distribution of dividend received from a Cyprus-resident company in which he is a shareholder. Two things count as such a distribution: the market value of a company asset used personally by the shareholder or a person connected with him, and the difference between the market value of an asset transferred to the shareholder and the consideration actually paid. Value is measured at the date personal use begins, and where the asset has no connection with the company's business the personal-use proportion is deemed to be 100%.

The mechanism runs one way. An increase in the proportion of personal use generates an additional charge measured at the value on the date of the increase; a decrease in that proportion, a subsequent ordinary dividend, the return of the asset to the company or a contribution of assets to it give nothing back — the contribution paid is not refunded in any of these cases. An apartment, a yacht or a car held by a Cyprus company and used by the beneficial owner now carries an annual cost that should be quantified in advance.

### Share options and ex gratia payments

Two less prominent items. Section 20Δ taxes at 8% the benefit accruing to an employee or director from share options or shares granted under an employer incentive plan approved by the Tax Commissioner, subject to a minimum three-year vesting period, a prohibition on transfer before it ends, and an exercise or acquisition price no lower than 50% of the value of the shares at the date the plan was approved. The relief is capped at twice the employee's annual income from that employer and at EUR 1,000,000 in aggregate per rolling decade, and it does not apply to a person connected with the company under section 33. Employers were given six months from the entry into force of the law to submit for approval plans whose vesting period began earlier. Section 20ΣΤ works in the opposite direction, taxing ex gratia and similar payments at 20% to the extent they exceed EUR 200,000.

## Crypto-assets: section 20Ε

Crypto-assets receive a dedicated section and a dedicated rate — 8% on profits from their disposal. The law defines "crypto-assets" by reference to Article 3(1)(5) of Regulation (EU) 2023/1114, that is, MiCA. The choice is deliberate: the perimeter of the Cyprus charge follows European market regulation automatically, without a further amendment to the tax law.

Disposal covers four acts: sale, gift, exchange of one crypto-asset for another, and use of a crypto-asset as a means of payment. Token-for-token exchange and payment in crypto are therefore taxable events, which is the point most often missed by a holder used to computing tax only on exit to fiat.

The loss rules are restrictive in all three directions. A loss on the disposal of crypto-assets may be set off only against profits on the disposal of crypto-assets arising in the same tax year; it is neither carried forward to later years nor surrendered within a group under section 13(4) to (11). Crypto sits in a closed compartment, and a loss-making year is simply lost.

Mined crypto is carved out expressly. The disposal of crypto-assets acquired through mining activity falls outside section 20Ε, and any crypto profit outside that section is taxed under Parts III and V of the law in the ordinary way. The 8% rate addresses the holder; the producer remains within the general regime.

## What survives of the old regime

The transitional layer is the most practical part of the reform. Dividends paid to a shareholder by a Cyprus company out of profits of tax years up to and including 2025 bear the defence contribution at 17% for six years from the entry into force of the law, that is, through 2031. The 5% rate applies only to profits earned from 2026 onwards. For a company with accumulated undistributed profit this is a choice between two rates differing by more than three times, and the year of origin has to be tracked tranche by tranche.

Deemed dividend distribution is repealed prospectively and wound down through a transition. The 70% rule is retained for profits of tax years 2024 and 2025: on the expiry of two years from the end of the relevant year, 70% of the profits after corporate tax are treated as distributed and the contribution is 17%. On a dissolution, the profits of the last five years, to the extent earned in tax years up to and including 2025 and not already distributed or deemed distributed, are treated as distributed on dissolution, again at 17%. The rule does not apply at all to profits earned from 2026. Both limbs reach only profits attributable directly or indirectly to an individual who was resident in the Republic at the date of the deemed distribution.

The domicile rule stands: a person who has been a Cyprus tax resident for at least 17 of the last 20 years is deemed to have acquired Cyprus domicile. The reform adds a further element — a person once deemed domiciled retains that status until he completes twenty years during which he was not a Cyprus tax resident, so a short absence does not reset the count. The non-dom regime itself is untouched: the defence contribution is still borne only by a person who is both resident and domiciled. The regime is covered in [Cyprus: Non-Dom and the 60-Day Rule](https://wiki.private.law/en/cyprus-non-dom).

### The flat contribution under section 3Δ

For those who reach the seventeen-year boundary, section 3Δ introduces an alternative method: an individual without a Cyprus domicile of origin who is deemed domiciled under the 17-of-20 rule may elect to pay a flat EUR 50,000 a year irrespective of the level of his income. The election is irrevocable and binds for five consecutive tax years, and may be made for no more than two such five-year periods. The application is made on a prescribed form by 30 June of the first year of the period, and once the Commissioner accepts it the whole amount — EUR 250,000 for the five years — is paid in a single instalment by the end of the month following the month of acceptance.

The perimeter is closed on every side. Failure to pay within the deadline voids the election: the section applies for no tax year at all and the contribution is computed on income under sections 3 to 3Γ. What has been paid is not set off against other tax liabilities and is not refunded on any ground, and no credit for foreign tax is given against it.

> 💡 Section 3Δ is often described as buying an extension of the zero rate. The text does not support that reading: the mechanism substitutes a fixed sum for the income-based computation of the defence contribution and discharges the liability for that contribution alone. Income tax, GeSY and capital gains tax on Cyprus immovable property remain payable in full and separately. The break-even is EUR 250,000 over the five years, and it has to be computed across both lines at once — 5% on dividends and 17% on interest — taking account of accumulated profit still carrying 17%.

The reform also has a deferred component. From 1 January 2031 the redemption of a unit or share in an open-ended or closed-ended collective investment scheme constituted as a company is treated as a reduction of capital, and the gain on such a redemption, reduced by any capital gains tax paid, constitutes a dividend. Holders of fund structures have a five-year window to restructure.

## The reform and the global minimum tax

The rate increase to 15% is usually explained by Pillar Two. The direction is right, but the two do not equate. The global minimum is measured on the effective rate: GloBE income and covered taxes are computed under their own rules with their own adjustments, and the headline figure does not enter that computation. A Cyprus company using the IP box at an effective rate of around 3%, or the notional interest deduction, can readily produce an effective rate below 15% while the nominal rate is fifteen. For a group with turnover of EUR 750 million or more, raising the general rate removes part of the risk without replacing the top-up computation.

A separate question is whether Cyprus rules are recognised as qualified. The [OECD central record of legislation with transitional qualified status](https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-minimum-tax/administrative-guidance-globe-rules-pillar-two-central-record-legislation-transitional-qualified-status.pdf), approved by the Inclusive Framework on 5 January 2026, is current as at 1 December 2025, and Cyprus does not appear in it. The document itself, however, states expressly that the absence of a jurisdiction's legislation from the record does not mean the legislation is not qualified; it means only that the transitional qualification mechanism has not yet been initiated or completed for it.

Within the EU the question was settled differently and earlier. According to the [European Commission FAQ of 29 May 2026](https://taxation-customs.ec.europa.eu/news/pillar-2-global-minimum-tax-directive-new-faq-available-2026-05-29_en), the qualified status of the Cypriot IIR derives directly from Article 3(18) of [Directive (EU) 2022/2523](https://eur-lex.europa.eu/eli/dir/2022/2523/oj) for fiscal years commencing on or after 31 December 2023, and all member states should treat Cyprus as having a qualified IIR in effect. The Luxembourg tax administration [confirmed this for the purposes of its own law in June 2026](https://kpmg.com/us/en/taxnewsflash/news/2026/07/luxembourg-draft-legislation-sbs-package-confirmation-cyprus-qualified-pillar-two-iir.html).

For a counterparty this produces a practical split. An EU group member relies on the directive and the question is closed. A member in a third jurisdiction checks the central record, fails to find Cyprus and — reading the record carelessly — concludes that the rules are not qualified, with consequences for rule order and for the UTPR. The conversation with such counterparties is best opened with the record's own caveat, which disposes of the objection faster than any discussion of the rate.

## Automatic exchange: what is visible about a Cyprus resident

The reform lowered rates without removing anything from automatic exchange; 2026 in fact adds two new streams to it.

The first is crypto-assets. Under DAC8 crypto-asset service providers collect data from 1 January 2026, and the [consolidated text of Directive 2011/16/EU](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02011L0016-20260101) allows nine months after the end of the calendar year to which the provider's reporting obligations relate, so the first exchange within the EU falls due by 30 September 2027. Outside the EU, Cyprus is in the second CARF wave with first exchanges by 2028. Cyprus did not transpose DAC8 on time: the Commission [opened infringement proceedings](https://ec.europa.eu/commission/presscorner/detail/en/inf_26_115) against twelve member states, Cyprus among them, for failing to transpose Directive (EU) 2023/2226 in full. That does not displace the provider's obligation to collect and report.

The second is advance rulings. DAC8 rewrote the definition of an advance cross-border ruling to cover a ruling on the question whether a natural person is resident for tax purposes in the member state issuing it. The carve-out for rulings concerning exclusively the tax affairs of natural persons is retained, but it no longer applies to rulings issued, amended or renewed after 1 January 2026 where either the amount of the transaction stated in the ruling exceeds EUR 1,500,000 or the ruling determines whether a person is resident for tax purposes in the issuing member state. The second limb carries no monetary threshold at all.

The Cyprus case shows what this means. A client holding a tax residence confirmation, or an agreement under section 3Δ, holds a document that stays outside exchange while it continues unchanged. The first renewal or amendment brings it inside, and the residence determination reaches the tax administrations of the interested jurisdictions simultaneously and regardless of amounts. The moment such a document becomes visible is fixed by the date of its renewal, and a change of tax base should be planned from that date rather than from the date of relocation.

## Who gained and who lost

| Who | What changed | Outcome |
| --- | --- | --- |
| Employee on a middle income | Nil band EUR 19,500 → EUR 22,000, top band EUR 60,000 → EUR 72,000 | Gain, largest in the EUR 40,000–72,000 range |
| Domiciled owner of a Cyprus company | Contribution on dividends 17% → 5%, but 17% for six more years on pre-2026 profit | Gain on new profit, deferred until accumulated profit is exhausted |
| Resident non-dom | Regime untouched; after 17 years, ordinary contribution or EUR 50,000 a year | Neutral, with a paid option at the boundary |
| Operating company with Cyprus profit | Rate 12.5% → 15%, loss carry-forward 5 → 7 years | Loss, partly cushioned by the loss rules |
| Shareholder using company assets | New 10% charge on disguised distribution | Loss, a new annual cost |
| Holder of crypto-assets | An 8% rate in place of uncertainty, but losses without carry-forward | Certainty at a price above the former grey zone |
| Landlord of Cyprus property | Defence contribution on rent abolished | Gain, unqualified |

The overall shift is that Cyprus has stopped selling a low rate and started selling predictability. For a group that came for 12.5% the island is now more expensive. For a person who lives there and draws income from his own company it is materially cheaper, provided the profit was earned after the reform.

## Risks

> ⚠️ Accumulated profit is the principal trap of the first years: a distribution out of profits up to and including 2025 bears 17% until 2031, and the payment decision has to be taken by year of origin, because the balance-sheet figure conceals that split. Crypto losses are neither carried forward nor surrendered within a group, so a loss-making year is lost entirely, and token-for-token exchange and payment in crypto are taxable events. Personal use of company assets costs 10% a year on market value from 2026, and nothing is refunded when the asset is returned. Raising the nominal rate to 15% does not guarantee passing the GloBE effective rate test — with an IP box or NID the top-up computation remains. Section 3Δ neither restores the zero rate nor covers income tax, and a missed payment voids the regime retrospectively for the whole five-year period.

> 🍓 In short: corporate rate 15%, a personal scale with a nil band to EUR 22,000 and 35% above EUR 72,000, defence contribution of 5% on dividends, still 17% on interest, abolished on rent, 10% on disguised distribution, and 8% on crypto-assets under section 20Ε with losses ring-fenced to the year and mining excluded. The old regime survives through profit: 17% on pre-2026 profit for six more years, and deemed dividend distribution at 70% for 2024 and 2025 and on dissolution. The citations are Ν. 244(Ι)/2025 and Ν. 245(Ι)/2025; the number 207(I)/2025 has nothing to do with the reform.

## Q/A

### Which laws carried the reform?

Ν. 244(Ι)/2025 amended the Income Tax Law and Ν. 245(Ι)/2025 amended the Special Defence Contribution Law. Both were published in the Official Gazette of the Republic of Cyprus, Annex Ι(Ι), No. 5070 of 31 December 2025, and both are in force from 1 January 2026. The citation 207(I)/2025 found in external summaries belongs to a law on inland transport.

### Dividends are at 5% now — can accumulated profit be distributed?

The 5% rate applies to profits earned from 2026 onwards. Dividends out of profits of tax years up to and including 2025 bear the defence contribution at 17% for six years from 1 January 2026. The computation has to follow the year in which the profit arose; the undistributed-profit figure in the balance sheet does not give that split.

### Has deemed dividend distribution been abolished?

Not entirely. The 70% rule is retained for profits of tax years 2024 and 2025: two years after the end of the relevant year, 70% of profits after corporate tax are treated as distributed at 17%. On a dissolution, the profits of the last five years to the extent earned up to and including 2025 are treated as distributed. The rule does not apply to profits from 2026 onwards.

### How is crypto taxed, and what about mining?

8% on profits from the disposal of crypto-assets under section 20Ε; disposal means sale, gift, exchange for another crypto-asset and payment in a crypto-asset. A loss is set off only against crypto profits of the same year and is neither carried forward nor surrendered within a group. The disposal of mined crypto-assets falls outside section 20Ε and is taxed under Parts III and V of the law.

### Is interest really still taxed at 17%?

Yes. Section 3Β retains 17% on interest for a resident and domiciled individual, with a reduced 3% on government and listed debt securities and a right to a refund of the amount withheld above 3% where total annual income does not exceed EUR 12,000. Summaries asserting that this charge was abolished or reduced do not match the text of the law.

### What does the flat EUR 50,000 contribution buy?

It replaces the income-based computation of the defence contribution with a fixed sum, for an individual without a Cyprus domicile of origin who is deemed domiciled under the 17-of-20 rule. The election is irrevocable for five years, the application is due by 30 June of the first year, EUR 250,000 is paid in one instalment, and no more than two five-year periods are available. It does not cover income tax, GeSY or capital gains tax on Cyprus immovable property.

### Cyprus is absent from the OECD record — are its rules unqualified?

That conclusion does not follow from the record. It is current as at 1 December 2025 and states expressly that the absence of a jurisdiction means only that the transitional qualification mechanism is not yet complete. Within the EU the status of the Cypriot IIR derives from Article 3(18) of Directive (EU) 2022/2523 for fiscal years from 31 December 2023, as the Commission set out in its FAQ of 29 May 2026.

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## Factual claims

- The corporate rate rises from 12.5% to 15%.
- Loss carry-forward is extended from five years to seven: in the first proviso to section 13(1) the word "five" is replaced by "seven".
- The IP box rate was not amended directly, but it is a function of the corporate rate: section 9(1)(κ) allows a deduction of 80% of qualifying profits from a qualifying intangible asset, and the remaining 20% is taxed at the general rate.
- The personal income tax scale from tax year 2026 is as follows.
- The rate on interest is retained at 17%.
- The defence contribution on rental income is abolished outright: the definitions of rent and finance lease are deleted from the law.
- In its place comes section 3Α: a resident individual pays 10% on the amount of a disguised distribution of dividend received from a Cyprus-resident company in which he is a shareholder.
- Crypto-assets receive a dedicated section and a dedicated rate — 8% on profits from their disposal.

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