Cyprus Changes Tax Rules: What's in Store for Businesses and Individuals

The Cypriot Parliament has officially adopted a comprehensive package of tax amendments. The reform, which includes 33 changes, marks a transition to a more transparent, modern, and balanced tax system in line with European standards.

Major Changes for Business

• Corporate Tax Increase
  Starting in 2025, the corporate tax rate in Cyprus will increase from 12.5% ​​to 15%. This move brings the island's tax system more in line with OECD recommendations and EU practices, while still remaining one of the most attractive jurisdictions in Europe in terms of tax burden.
• Deemed Dividend Tax Abolition
  Starting in 2026, the 17% deemed dividend tax on 70% of distributed profits will be abolished. This decision is particularly important for companies with foreign shareholders, as it eliminates one of the most controversial dividend tax mechanisms.
• Introduction of a New Dividend Tax
  The abolished tax will be replaced by a flat 5% dividend tax—a clear, predictable, and transparent instrument effective January 1, 2026.
• Cryptocurrency and Options Tax
  For the first time, Cyprus is introducing an 8% tax on profits from cryptocurrency and stock options transactions. This reflects the government's commitment to regulating modern financial instruments without creating excessive barriers for innovative businesses.
• Loss Carryforward for Up to 7 Years
  Companies will now be able to carry forward losses for up to 7 years, instead of the previous 5. This will increase the flexibility of tax planning and allow businesses to more effectively compensate for temporary losses.

Changes for Individuals

• New Tax-Free Minimum. For tax residents, a tax-free minimum of €20,500 has been established.
• Expansion of Tax Deductions. New deductions have been introduced: for expenses related to the purchase and renovation of a home; For the maintenance and education of children; for "green" expenses—energy-saving technologies, electric vehicles, etc.

These measures are aimed at supporting families and stimulating sustainable development.

What has been abolished and simplified

1. Abolition of the "business tax residency" rule
Now, a person will no longer be automatically considered a tax resident of Cyprus simply because they own a business on the island. This simplifies tax planning for foreigners and prevents double taxation.

2. Clarification of expense requirements
Previously, to qualify expenses as deductible, it was necessary to prove that they were "necessary." The new version removes this wording, making tax accounting simpler and more flexible.

Importance of the reform for foreign investors and companies

The adopted reform makes the Cypriot tax system more transparent and predictable, bringing it closer to European Union standards, while maintaining a low overall tax burden.

• For entrepreneurs and HNWIs (high-net-worth individuals), changes in the taxation of dividends and crypto assets will signal a possible asset restructuring.
• For international corporate structures, Cyprus is gradually moving away from hybrid regimes, but remains an advantageous location within the EU thanks to its stability, double taxation agreements, and lenient administrative practices.

Result: Fiscal Neutrality and Competitiveness

The main idea of ​​the reform is fiscal neutrality: the state does not seek to increase the overall tax burden, but rather redistributes it for a fairer and more transparent system.

Cyprus remains an attractive jurisdiction for business, investment, and life, while strengthening its reputation as a responsible European tax center. IT-OFFSHORE specialists will help analyze the impact of the reform on your business, conduct tax planning, and offer optimal solutions under the new legal conditions of Cyprus.

Contact IT-OFFSHORE experts to maintain the efficiency of your international structure and take advantage of the updated Cyprus tax system.