Cyprus Taxes 2026: The Complete Guide to Every Tax You Might Pay in Cyprus

The Cyprus tax system went through its first comprehensive reform in over two decades on 1 January 2026. The corporate tax rate rose from 12.5% to 15%. Special Defence Contribution on dividends was cut from 17% to 5%. SDC on rents was abolished. Stamp duty was abolished. The 60-day tax-residency rule was relaxed. The personal income tax bands were widened. The non-dom regime was extended.

This article is the single reference for every Cyprus tax as it stands in 2026 — corporate, personal, SDC, VAT, capital gains, social insurance and GESY, IP Box and NID, property transfer fees, withholding tax, stamp duty, estate and gift tax, double tax treaties and transfer pricing. Each section cites the applicable rate, the legal basis, and any reform change.

The 2026 Cyprus tax landscape at a glance

Cyprus operates an EU-harmonised, common-law-style tax system built around the Income Tax Law (Law 118(I)/2002), the Special Defence Contribution Law (Law 117(I)/2002), the VAT Law (Law 95(I)/2000), the Capital Gains Tax Law (Law 52/1980), and a body of ancillary tax legislation implementing EU Directives (Parent-Subsidiary, Interest-Royalties, ATAD I/II, Pillar Two). Each tax interacts with the others, particularly in international structures — a Cyprus holding company typically uses the corporate tax rules for received dividends, the SDC rules for onward distributions, and the treaty network for foreign WHT.

The 2026 tax reform (parliamentary approval 22 December 2025; official gazette 31 December 2025; effective 1 January 2026) was the largest rewrite of the system since independence. The changes broadly aligned Cyprus with the OECD Pillar Two framework while preserving — and in several cases enhancing — the attributes that make Cyprus attractive for international business.

What the 2026 tax reform changed

1. Corporate income tax

Rate

Cyprus companies pay corporate income tax on worldwide profits at the standard rate of 15% from 1 January 2026 (previously 12.5%). The rate applies uniformly to all Cyprus tax-resident companies, not only multinational groups above the Pillar Two €750 million consolidated revenue threshold.

Tax residency of a company

A company is Cyprus tax-resident if its management and control is exercised in Cyprus. From 31 December 2022, a complementary incorporation testwas introduced: a company incorporated in Cyprus is also Cyprus tax-resident, unless it is tax-resident in another jurisdiction under that jurisdiction's rules. Both tests apply today.

Exempt corporate income

• Dividends received by a Cyprus company are generally exempt from corporate tax under Article 8(20) of the Income Tax Law, subject to anti-abuse limitations.
• Profits from the disposal of securities — shares, bonds, debentures, options — are 100% exempt.
• Profits from a foreign permanent establishment(subject to conditions, with option to elect taxation).
• Foreign exchange differences that are not arising from actual foreign exchange trading.

Loss carry-forward and group relief

Tax losses can be carried forward for 7 years(increased from 5 years in the 2026 reform). Group relief is available between Cyprus tax-resident companies sharing at least 75% common ownership, subject to conditions; the relief has been extended in limited cases to cover EU/treaty subsidiaries.

Tonnage tax

Qualifying Cyprus ship-owners, ship-managers and charterers can elect to be taxed under a tonnage-tax regime based on the net tonnage of the vessels rather than on profits. The regime is recognised as one of the most comprehensive in the EU.

Pillar Two top-up

Cyprus has implemented the EU Minimum Tax Directive (2022/2523). Groups with consolidated revenue of at least €750 million are subject to a qualified domestic minimum top-up tax (QDMTT), Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) where applicable, ensuring effective tax rate of at least 15%.

2. Personal income tax

Bands in 2026

These bands apply to employment, self-employment and pension income. Dividends are not subject to personal income tax in Cyprus; they are only potentially subject to SDC (5% for Cyprus-domiciled residents on post-2026 profits; 0% for non-doms for 17–27 years).

Foreign pensions

Foreign pension income received by a Cyprus tax resident can elect to be taxed at a flat 5% on amounts exceeding €3,420 per year, or under the standard progressive bands — whichever is lower. The election is made annually.

Filing

The personal tax return (Form TD 1) is due by 31 July of the year following the tax year. Filing is electronic, through the Tax For All (TFA) portal.

3. Special Defence Contribution (SDC)

SDC is a personal tax charged only on Cyprus tax residents who are Cyprus-domiciled. The 2026 reform reshaped it significantly.

Dividends

• 5% on dividends paid out of post-2026 profits to Cyprus-domiciled tax residents.
• 17% on dividends paid out of pre-2026 retained profits, if the distribution occurs on or before 31 December 2031.
• 0% for non-doms (SDC-exempt for 17 consecutive years, extendable via two 5-year paid extensions).

Interest

• 17% on most passive interest income for Cyprus-domiciled residents.
• 3% on interest from Cyprus government savings bonds and approved provident funds.
• Interest arising in the ordinary course of business is income tax, not SDC.
• Non-doms: 0%.

Rental income

SDC on rental income was abolished from 1 January 2026 for all taxpayers (previously 3% on 75% of gross rent). Rental income is now taxed only under the personal income tax bands (typically on 80% of gross after a 20% notional deduction, or on actual allowable expenses), plus GESY at 2.65%.

Deemed Dividend Distribution (DDD)

DDD was abolished for profits earned from 1 January 2026 onwards. Pre-2026 profits retained in a Cyprus company continue to be subject to the old DDD rules (70% of after-tax profits deemed distributed after 2 years if not actually distributed). A new targeted anti-avoidance rule applies where value is transferred to shareholders or connected persons in substance as a concealed distribution: a 10% SDC can apply in those cases.

4. Capital Gains Tax (CGT)

Cyprus CGT applies at 20% only to gains from:

• The sale of Cyprus-located immovable property; and
• The sale of shares in companies that derive more than 50% of their value from Cyprus immovable property (non-listed).

Gains on shares, bonds, debentures, options and other securities — including foreign shares, foreign bonds, and crypto-assets — are fully exempt from Cyprus CGT, regardless of holding period or percentage.

Lifetime exemptions (2026)

Transfers between spouses and close relatives up to the third degree, transfers on death, transfers to charities/government, and gifts to family-owned companies are also exempt. Cyprus property acquired between 17 July 2015 and 31 December 2016 is permanently exempt from CGT on future sale.

5. Value Added Tax (VAT)

Cyprus VAT is an EU-harmonised tax under the VAT Law (Law 95(I)/2000) implementing Directive 2006/112/EC.

Mandatory VAT registration when taxable turnover exceeds €15,600 in any 12-month period. Quarterly VAT4 returns are due by the 10th of the second month after each quarter end. VIES statements are filed monthly for intra-EU B2B supplies of goods and services. OSS covers B2C digital sales across the EU above €10,000 per year.

6. Social Insurance and GESY

Social Insurance

Applied on gross earnings up to a cap of €68,904 per yearin 2026 (maximum insurable earnings ceiling, up from €62,868 in 2025).

Employer-only contributions

• Social Cohesion Fund: 2% (uncapped, on gross payroll)
• Redundancy Fund: 1.2%
• Industrial Training Fund: 0.5%
• Holiday Fund: 8% (where employer is not exempt)

GESY (National Health System)

GESY is capped on total income of €180,000 per year. Non-doms pay GESY; the non-dom exemption applies only to SDC.

7. IP Box and NID

IP Box (modified nexus)

Qualifying profit from qualifying intellectual property (software copyright, patents, utility models) receives an 80% deduction; only 20% is taxed at the 15% corporate rate. The pre-nexus effective rate is 3%; the post-nexus effective rate (after the 30% uplift of the modified-nexus formula) is typically around 3%for well-structured in-house R&D operations. Marketing intangibles do not qualify. See our dedicated IP Box article.

Notional Interest Deduction (NID)

New equity introduced into a Cyprus company is deemed to generate a notional interest expense, deductible against taxable income up to 80% of taxable income per type of income. The reference rate is the 10-year Cyprus government bond yield plus a 3% risk premium. Useful for holding and financing companies funded with fresh equity rather than debt. NID survived the 2026 reform unchanged.

8. Property transfer fees

Property transfer fees are payable to the Cyprus Department of Lands and Surveys when immovable property is transferred:

A 50% discount applies to these fees (in force since 2015 and retained in 2026). No transfer fees are payable where VAT was applied to the transfer (typical on new builds). Reduced 5% VAT may apply to first-home purchases up to 130 m² and €350,000 on the main residence, subject to cumulative conditions.

9. Stamp duty (abolished in 2026)

The Cyprus Stamp Duty Law was repealed effective 1 January 2026 as part of the tax reform. Documents executed on or after that date are no longer subject to stamp duty.

Documents executed before 1 January 2026 remain governed by the previous law: 0.15% on contract values from €5,001 to €170,000; 0.20% above €170,000; with a cap of €20,000 per document. Legacy documents requiring stamping (for example a 2024 loan agreement still being registered) continue to follow the old rules.

10. Withholding tax

Cyprus is one of the few EU jurisdictions applying a 0% default withholding tax on outbound dividends, interest and royalties paid to non-residents.

Defensive WHT (EU blacklist + low-tax jurisdictions)

Since 31 December 2022, Cyprus has applied defensive WHT to associated-party payments to recipients in EU-blacklisted jurisdictions. From 1 January 2026 the defensive WHT regime extends to recipients in low-tax jurisdictions (defined as jurisdictions with an effective corporate tax below half the Cyprus rate, i.e. below 6.25% in 2026 terms).

• Dividends: 17% WHT to associated companies (>50% association) in blacklisted / low-tax jurisdictions.
• Interest and royalties: 17% WHT on interest and 10% on royalties to blacklisted recipients; deductibility is denied for payments to associated low-tax recipients.

Double tax treaties and EU Directives (Parent-Subsidiary, Interest-Royalties) reduce or eliminate WHT even within these defensive regimes where the conditions are met.

11. Inheritance, estate, gift and wealth tax

Cyprus has no inheritance or estate tax (abolished from 1 January 2000), no gift tax on monetary gifts, and no wealth tax. This is a material part of the jurisdiction's appeal for high-net-worth family structures. Capital gains or property transfer fees may apply on the transfer of specific assets (e.g. Cyprus real estate) but the transfer itself is not separately taxed as inheritance.

12. Double tax treaties

Cyprus maintains 65+ double tax treaties, including with: United Kingdom, United States, Germany, France, Italy, Spain, Netherlands, Luxembourg, Ireland, Austria, Switzerland, Canada, India, China, Singapore, South Africa, UAE, Saudi Arabia, Qatar, Russia (status subject to recent developments), Ukraine, most of the CIS states, and most of sub-Saharan Africa's largest economies.

Cyprus is a signatory to the Multilateral Instrument (MLI), which applies the Principal Purpose Test to treaty benefits: a treaty benefit can be denied where obtaining it was one of the principal purposes of the arrangement. Cyprus participates in CRS (Common Reporting Standard), FATCA, DAC6 (reportable cross-border arrangements) and DAC7 (platform operators).

13. Transfer pricing and BEPS compliance

Formal Cyprus transfer-pricing rules have applied since 1 January 2022, based on the OECD Transfer Pricing Guidelines. For tax year 2026 the documentation thresholds were increased:

• Local File required where controlled transactions per category exceed: €10 million for financial; €5 million for goods; €2.5 million for services/IP.
• Master File required for ultimate/surrogate parents of MNE groups with consolidated revenue above €750 million.
• Summary Information Table (SIT) is mandatory for all entities with controlled transactions, irrespective of threshold.
• Simplified documentation for transactions below the Local File threshold.

Advance Pricing Agreements (APAs) are available. Country-by-Country Reporting (CbCR) applies to groups with consolidated revenue ≥ €750 million. DAC6 mandatory disclosure requires reporting of specified cross-border arrangements within 30 days of the trigger. Penalties for missed TP documentation are €5,000–€20,000; for a late SIT, €500.

14. The 2026 Cyprus tax calendar

15. Personal reliefs: non-dom, 50% expat exemption

Non-dom

Cyprus tax residents who are non-domiciled are exempt from SDC on dividends, interest, and (pre-2026) rents for 17 consecutive years. The 2026 reform introduced two paid 5-year extensions at €250,000 each, taking the maximum non-dom period to 27 years. An alternative flat €50,000/year SDC regime is available for high-passive-income individuals. See our dedicated tax residency and non-dom guide.

50% expat exemption (Article 8(23A))

Individuals taking up first employment in Cyprus on or after 1 January 2022 can claim a 50% income tax exemption on Cyprus employment income for 17 tax years, provided:

• Annual remuneration from the Cyprus employment exceeds €55,000 (threshold lowered from €100,000 under the 2026 reform); and
• The individual was not a Cyprus tax resident for at least 15 consecutive years before the year of first Cyprus employment.

The exemption applies even if annual remuneration temporarily falls below €55,000 in any year during the 17-year window (subject to conditions). A separate 20% exemption (capped at €8,550) applies for lower-income cases.