Cyprus reshapes tax system in 2026

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Cyprus has enacted a comprehensive tax reform package effective from 1 January 2026, following its publication in the official gazette on 31 December 2025. The changes significantly revise corporate taxation rules and signal a strategic shift toward closer alignment with EU and OECD tax standards while preserving the island’s role as a competitive business hub.

Corporate tax rate increased

At the core of the reform is an increase in the corporate income tax rate from 12.5% to 15% for all companies. The move brings Cyprus into line with the emerging global minimum tax environment and reduces exposure to international tax scrutiny, particularly within the EU framework.

Dividend withholding tax eased

Balancing the higher headline rate, Cyprus has reduced withholding tax on dividend payments to associated companies in low-tax jurisdictions from 17% to 5%. This adjustment improves the flexibility of Cypriot holding structures while maintaining safeguards for outbound profit distributions.

Stricter treatment of non-cooperative jurisdictions

The reform removes the exemption for profits earned by foreign permanent establishments located in jurisdictions listed by the EU as non-cooperative. At the same time, it enhances domestic tax planning options by extending the loss carry-forward period from five years to up to ten years, subject to specific conditions.

Incentives for innovation and agriculture

Cyprus has extended the 120% super-deduction for qualifying research and development expenditure on intangible assets until 2030. In addition, a new 120% super-deduction is introduced for qualifying investment in machinery and installations used in agricultural and livestock production, reinforcing support for innovation and the real economy.

Crypto taxation formalised

A notable innovation is the introduction of a flat 8% income tax rate on gains arising from cryptoasset transactions. This establishes a clear and predictable tax framework for digital assets, reducing uncertainty for investors and businesses operating in the crypto space.

As International Investment experts report, Cyprus’s 2026 tax reform marks a strategic recalibration rather than a loss of competitiveness. Higher corporate taxation is offset by extended incentives, clearer crypto rules and more generous loss utilisation, positioning Cyprus as a compliant yet business-friendly jurisdiction in the evolving European tax landscape.