In December 2025 Cyprus’ House of Representatives approved a tax reform package – the island’s biggest tax reform in 23 years, with most changes taking effect from 1st January 2026.
The tax reform package brings good news to the real estate market (with favourable changes to Capital Gains Tax, and the complete abolition of Stamp Duty), and elsewhere the reform seems sympathetic in targeting relief for lower earning households (revised brackets and more targeted allowances), is aligning with international direction (higher corporate rate), whilst also carrying a structural reset of dividend taxation and a positive shift towards stronger enforcement.
Cyprus continues to rank among the more competitive corporate tax jurisdictions within the European Union and overall, the reform appears to bring well-balanced change – competitive and modern, with fair guidelines, and a nod to Cyprus repositioning itself in a more credible light.
Capital Gains Tax & Real Estate-linked changes
Capital Gains Tax
Capital Gains Tax (CGT) remains at 20%, however the reforms significantly enhance exemptions available to property owners.
Key changes include:
• Increase of the general lifetime CGT exemption from €17,086 to €30,000
• Increase of the primary residence exemption from €85,430 to €150,000, subject to a 5-year occupation requirement
• Agricultural land exemption increased from €25,629 to €50,000
• Continued deductibility of documented improvement costs, legal fees, transfer fees and estate agent commissions
• Retention of the full CGT exemption for properties acquired between 16 July 2015 and 31 December 2016
With proper planning and robust documentation, Capital Gains Tax exposure can be significantly reduced and, even in some cases, eliminated.
Property-rich share disposals: the “indirect” threshold reduced to 20%
The definition of immovable property has been amended in order to reduce the percentage subject to taxation and to include the disposal of shares in companies where the market value derives indirectly by 20% (instead of 50%) from immovable property in Cyprus.
The reform also introduces a method for determining disposal proceeds in cases where a company’s market value is essentially represented by the market value of immovable property, ensuring that declared consideration can be adjusted by reference to other assets and liabilities.
Stamp duty taxes are fully abolished
The Law relating to Stamp Duties has been repealed, and Stamp Duty Taxes are fully abolished as of 1st January 2026.
This reform does not only present a reduction in cost, but will significantly improve the ease of doing business in Cyprus, improving the speed of the execution of deals and reducing friction – great news for the Real Estate Market.
Corporate & Business Tax
• Corporate Income Tax increases from 12.5% to 15%, aligning with OECD Pillar Two requirements. This is a big shift, however it should be taken in context; Cyprus continues to sit at the competitive end of corporate tax within the European Union, especially when considering the new abolishment of stamp duty which also improves transaction efficiency.
• Loss Carry-Forward extended from 5 to 7 years.
• R&D Super-Deduction: 120% deduction on qualifying research and development expenditure on intangible assets extended through 2030.
• Entertainment Deductions increase from €17,086 to €30,000 per year.
• Modern economy provisions:
– A special method of taxation is introduced for profits arising from the disposal of crypto-assets, with a flat rate of 8%, with the ability to offset losses from disposal against profits within the same year.
– A special taxation regime of 8% is introduced on stock option rights under an approved employer share scheme, with statutory safeguards and caps (including limits linked to remuneration and a maximum benefit threshold over time).
Considered together, these modern economy provisions seem give a clear message: Cyprus wants to remain relevant to the modern economy.
Shareholder & Investment Income
- Special Defence Contribution (SDC) on dividends reduced from 17% to 5% for actual distributions.
- SDC on rental income and deemed dividend distribution abolished (rental income continues to be subject to income tax, but the SDC is removed).
- Deemed dividend distribution rule abolished (for profits earned after 1st January 2026), allowing full retention of profits.
Personal Taxation & Deductions
- Tax-Free Threshold raised from €19,500 to €22,000.
- New Progressive Income Tax Brackets:
– €22,001–€32,000: 20%
– €32,001–€42,000: 25%
– €42,001–€72,000: 30%
– Above €72,001: 35%
- Family & Student Deductions (per parent):
– 1st child: €1,000
– 2nd child: €1,250
– 3rd+ child: €1,500
- Income eligibility: up to €100k for 1–2 kids, up to €150k for 3–4, and up to €200k for 5+. (number of children as at 31 December of the tax year).
- Housing & Green Incentives: Mortgage interest/rent deduction up to €2,000
- Green investments up to €1,000
- Home insurance for natural disasters up to €500.
Housing allowance: It is interesting to note that this allowance is designed to be operationally straightforward: it targets two categories that represent the prevailing housing cost for most households: loan interest and rent. Secondly, it reinforces a wider policy objective – supporting long term housing stability and home ownership, while still recognising that a large portion of the housing market rents its primary residence.
- Non-domiciled (non-dom) status extension
- Non-dom status is more flexible now: after 17 years, you can extend it for up to two more 5-year periods (10 years total) by paying a €250,000 lump sum per period.
- Non-doms stay exempt from Special Defence Contribution on dividends, interest, and rental income during that time.
- Tax resident definition update: the 60-day rule for Cyprus tax residency is now simpler: you no longer need to prove you’re not a tax resident elsewhere to qualify.
- Modernisation of the special regime for foreign pension income: Tax residents receiving pension income from abroad can choose annually to be taxed either at normal progressive rates or at a flat 5% rate on pension income exceeding €5,000 per year (previously €3,420). This amendment recognises the changing composition of retirement income for internationally mobile persons and reinforces Cyprus’ appeal as a European destination for retirees and pensioners.
Other key measures that are important to note as part of the tax reform package in 2026 include:
- The gross income threshold for mandatory submission of audited accounts by individuals increases from €70,000 to €120,000.
- The deadline for submission of corporate tax returns is moved to 31 January of the second year following the tax year (this also applies to corporate tax payments).
- Income tax returns submissions become mandatory for all individuals age 25 and above who are Cyprus tax residents, regardless of whether they have taxable income. Mandatory submission of income tax returns by partnerships is also introduced.
- From 1 July 2026, payment of rent relating to immovable property in Cyprus exceeding €500 must be made through bank transfer (or other recognised traceable banking payment methods, such as bank cheque). Payments of €500 or less may continue to be paid in cash.
- The Commissioner is given power to suspend operation of a business and seal premises under specified patterns of non-compliance, including repeated non-filing or non-payment where the total amount due (including surcharges) exceeds specified thresholds, as well as invoice/receipt non-compliance.
Our team at Comark Estates boast over 50 years’ combined experience in real estate, with extensive and specialist knowledge of the Cyprus Real Estate market. Importantly – we are a fully licenced and registered real estate company in Cyprus. We are here to take the hard work and stress out of the selling process for you…we can, and will sell your property quickly, without any fuss, and at the right best possible price for you, our valued seller.
Get in touch today: contact@comarkestates.com
Disclaimer: the information provided by Comark Estates on this page is for general informational purposes only, and is provided in good faith. Comark Estates are not liable to any changes in this information.
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