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The Cyprus Tax Reform 2026: What Actually Changed
The Cyprus Tax Reform 2026: What Actually Changed: short answer
Last reviewed
The reform package was approved on 22 December 2025, published in the Official Gazette on 31 December 2025 and took effect on 1 January 2026. It raised the corporate rate to 15 percent, cut the Special Defence Contribution on dividends to 5 percent, and widened both residency tests.
| Approved | 22 December 2025 by the House of Representatives |
|---|---|
| Published | 31 December 2025 in the Official Gazette |
| Effective | 1 January 2026, unless a provision states otherwise |
| Corporate income tax | Raised from 12.5 percent to 15 percent |
| SDC on dividends | Reduced from 17 percent to 5 percent for domiciled residents |
| Corporate tax residence | Incorporation test added alongside management and control |
Most Cyprus material online predates this package. Anything describing a 12.5 percent corporate rate, a 17 percent dividend charge or a five-condition 60-day rule is out of date.
The dates, because they decide which rules apply
The package was approved by the House of Representatives on 22 December 2025, published in the Official Gazette of the Republic on 31 December 2025, and took effect on 1 January 2026.
Those dates matter more than usual. Several provisions turn on when profits were earned rather than when they are distributed, so a company can be applying two regimes at once during the transition. Any analysis of a Cyprus position taken in 2026 has to state which side of 1 January 2026 the relevant profits fall.
This page records what changed. It is written for readers checking whether material they have found elsewhere is current, which for most Cyprus content online it is not.
The corporate changes
| Provision | To 31 December 2025 | From 1 January 2026 |
|---|---|---|
| Corporate income tax | 12.5 percent | 15 percent |
| Corporate tax residence | Management and control in Cyprus | Incorporation in Cyprus, or management and control |
| Deemed dividend distribution | Applied to undistributed profits | Abolished for profits earned from 1 January 2026 |
| Stamp duty | Applied to a range of documents | Repealed |
| Audit | Required for every company | Review engagement available to small companies from 6 February 2026 |
| CGT on shares deriving value from property | Threshold of 50 percent | Threshold of 20 percent |
The rate. 12.5 percent to 15 percent, aligning Cyprus with the global minimum applied to large groups under the Pillar Two framework. For companies below the consolidated revenue threshold this is simply a rate rise; for those above it, much of the previous comparison against other jurisdictions was already academic.
Corporate tax residence. This is the structurally significant one. A company incorporated under the Cyprus Companies Law is now treated as Cyprus tax resident unless a double tax treaty provides otherwise. The previous condition, that the company not be tax resident in another state, was removed. The management and control test continues to apply alongside the new test rather than being replaced by it.
Deemed dividend distribution. Abolished for profits earned from 1 January 2026. The rules continue to apply to undistributed profits of 2024 and 2025 through to 31 December 2027, so this is a transitional position rather than a clean break.
Capital gains. The threshold at which shares are treated as deriving their value from Cyprus immovable property fell from 50 percent to 20 percent. A structure that sat comfortably outside the charge on the old test may sit inside it on the new one, measured against current asset values.
The personal changes
| Provision | To 31 December 2025 | From 1 January 2026 |
|---|---|---|
| SDC on dividends | 17 percent for domiciled residents | 5 percent for domiciled residents |
| SDC on rental income | Applied alongside income tax | Abolished |
| 60-day residency rule | Five conditions, including no tax residence elsewhere | Four conditions, that requirement removed |
| Non-domiciled status | 17 years | Extendable beyond the initial period, subject to conditions |
| Crypto-asset gains | Treated under general principles | A dedicated 8 percent charge under Article 20E |
| Foreign pension income | 5 percent flat above 3,420 euro | 5 percent flat above 5,000 euro |
| Approved share options | Taxed under general rules | A flat 8 percent within statutory caps |
The 60-day rule. The condition that the individual not be treated as tax resident by any other state was removed. This is the change most likely to be missed, because the five-condition formulation is repeated across almost every article written about Cyprus residency before 2026.
Its practical effect is significant. Previously, someone whose former country was slow to release them could not use the route at all. Now Cyprus residence can be established while another state still asserts a claim, and where both do, the treaty tie-breaker decides between them. The rule became a starting point rather than a gate.
Special Defence Contribution. The dividend rate fell from 17 percent to 5 percent, and the charge on rental income was abolished. Non-domiciled residents remain outside the Special Defence Contribution entirely, so this change affects domiciled residents rather than the non-dom population.
The reduction narrows the gap between domiciled and non-domiciled treatment. It does not close it, and for a founder taking substantial dividends the difference remains the reason non-dom status is claimed.
What this means for material published before 2026
A large proportion of the Cyprus content in circulation, including material still being published, describes the previous regime. The markers to check for are specific.
- A 12.5 percent corporate rate.
- A 17 percent Special Defence Contribution on dividends, stated without noting it now applies only to profits earned to 31 December 2025.
- The 60-day rule described as having five conditions, or requiring that you are not tax resident anywhere else.
- Corporate residence described as depending on management and control alone.
- A 50 percent threshold for shares deriving value from Cyprus immovable property.
- A 3,420 euro exempt band on foreign pension income, now 5,000 euro.
- A statement that every company must be audited, without noting the review engagement available to small companies for financial years beginning on or after 6 February 2026.
- Deemed dividend distribution described as applying generally, without the 2026 abolition.
Any one of those indicates the source predates the reform or has not been updated for it. That is worth knowing before a structure is built on it.
Common questions
When did the Cyprus 2026 tax reform take effect?
It was approved on 22 December 2025, published in the Official Gazette on 31 December 2025, and took effect on 1 January 2026 unless a specific provision states otherwise.
Does the incorporation test mean substance no longer matters?
No. A Cyprus incorporated company is now Cyprus tax resident unless a treaty provides otherwise, which changes the starting point. Where a treaty applies, the tie-breaker still asks where the company is effectively managed, and a foreign authority will apply its own analysis to the same facts.
Did the 60-day rule get easier?
Yes. The condition that the individual not be tax resident in any other state was removed, leaving four conditions. Being claimed as resident elsewhere no longer excludes you from the route, and where two countries both claim you the treaty tie-breaker decides.
Does the lower Special Defence Contribution affect non-domiciled residents?
No. Non-domiciled residents are outside the Special Defence Contribution altogether, so the reduction from 17 percent to 5 percent affects domiciled residents. It narrows the gap between the two positions without closing it.
Is deemed dividend distribution gone entirely?
It is abolished for profits earned from 1 January 2026. Undistributed profits of 2024 and 2025 remain within the rules through to 31 December 2027, so there is a transitional period rather than an immediate end.
Technical definition
A comprehensive amendment of the Income Tax Law, the Special Contribution for Defence Law and related legislation, approved by the House of Representatives on 22 December 2025, published in the Official Gazette on 31 December 2025, and effective from 1 January 2026 unless a specific provision states otherwise.
Practical implications
Two changes alter structuring decisions rather than only the arithmetic: corporate tax residence now follows incorporation as well as management and control, and the 60-day individual residency rule no longer requires the individual to be tax resident nowhere else.
Common misconceptions
The most consequential is that the incorporation test makes substance irrelevant. It does not. Where a treaty applies the tie-breaker still asks where the company is effectively managed, and a foreign authority assessing the same company asks the same question.