The Cypriot government revealed a comprehensive tax reform plan aimed at modernizing the tax system, aligning with international standards, and supporting families and businesses. While these proposals are pending parliamentary approval, they are expected to take effect in 2026.
Personal Income Tax
- Increased Tax-Free Threshold: The tax-free income threshold is proposed to rise from €19,500 to €20,500.
- New Tax Brackets:
- €20,501 – €30,000: 20%
- €30,001 – €40,000: 25%
- €40,001 – €80,000: 30%
- Over €80,000: 35% (previously applied to incomes over €60,000)
- Family and Green Incentives:
- Additional tax-free allowances of €1,000 per dependent.
- €1,500 tax-free allowance for parents purchasing their first home or paying rent.
- €1,000 tax-free allowance for green household upgrades.
- Single parents may benefit from double these allowances.
Corporate Taxation
- Corporate Income Tax: Increase from 12.5% to 15%, aligning with OECD’s global tax framework.
- Special Defence Contribution (SDC):
- Reduction of SDC on dividends from 17% to 5% for Cyprus tax-resident and domiciled individuals.
- Abolition of deemed dividend distribution rules.
- Removal of SDC on rental income.
Other Important Changes
- Stamp Duty: Will apply only to agreements related to real estate transactions, banking, and insurance contracts.
- Tax Loss Carry Forward: Extension from 5 years to 10 years, subject to conditions.
- Green & Digital Invesment Incentives: Companies investing in environmentally friendly initiatives or digital transformation may qualify for super deductions or accelerated depreciation, with no restrictions on carrying forward related tax losses.
These reforms aim to create a more equitable tax system, stimulate economic growth, and enhance Cyprus’s competitiveness on the international stage.
Balkan Global Hub 
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