Alpha News

New Tax System in Cyprus: Key Changes and Obligations

Published December 31, 2025, 15:22

The new tax system in Cyprus will come into effect on January 1st, 2026, following the approval of the relevant legislation by the House of Representatives. The Federation of Employers and Industrialists (OEB) significantly contributed to shaping the final amendments, aiming to strengthen the Cypriot economy and enhance business competitiveness. The most notable changes include an increase in corporate tax to 15%, a reduction in dividend withholding tax to 5%, the abolition of deemed dividend distribution, and the abolition of the Stamp Duties Laws. Furthermore, a director's liability is introduced for the entire duration of their position, even after resignation, and land allocation is considered a counter-performance. The special defense contribution on bonds from the New Market is reduced from 17% to 3%, and a notional deduction is granted to companies implementing Automatic Indexation Adjustment (AIA). A share attachment procedure is also introduced in cases of tax liabilities. A significant change is the mandatory submission of tax returns by all Cypriot residents over the age of 25, regardless of tax obligations. The income tax brackets for individuals are modified as follows: 0% up to €22,000, 20% between €22,001 and €32,000, 25% between €32,001 and €42,000, 30% between €42,001 – €72,000, and 35% for income exceeding €72,001. Finally, deductions are provided for children, home insurance, and mortgage interest. The OEB will continue to monitor the implementation of the reform and inform its members of any further clarifications or regulations issued by the competent authorities.