The Cyprus tax reform 2026, explained: what changed and what it means for your company

The 2026 reform is the biggest rewrite of Cyprus tax in decades. Parliament passed it on 22 December 2025, it appeared in the Official Gazette on 31 December 2025, and it has applied since 1 January 2026. Corporate tax went up. Tax on dividends came down. Deemed dividend distribution, stamp duty and SDC on rents are gone.

What changed in the Cyprus tax reform 2026?

Five changes carry most of the weight. The corporate income tax rate rose from 12.5% to 15%. SDC on dividends for Cyprus-domiciled shareholders fell from 17% to 5% for new profits. Deemed dividend distribution ended for profits earned from 2026. Stamp duty was abolished. Personal income tax got a higher tax-free threshold and new bands.

The reform is a package of seven laws. The main one is the Income Tax (Amendment) (No. 4) Law, N. 244(I)/2025, gazetted 31 December 2025.

A second set of changes matters to owner-managed companies:

• a new 10% SDC charge on "disguised" distributions
• an optional paid extension of the non-dom regime
• a looser 60-day tax-residency rule
• no more SDC on rental income
• tax losses carried forward for seven years instead of five
• an earlier corporate return deadline, starting with tax year 2026

The sections below cover each one.

What is the new corporate income tax rate?

The corporate income tax rate is 15% from tax year 2026. It applies to every Cyprus tax-resident company, with no reduced rate for small companies. Profits of 2025 and earlier stay at 12.5%.

Founders ask us two things about this.

First, this is not the OECD global minimum tax. Cyprus put that tax, known as Pillar Two, in a separate law that only concerns groups with consolidated revenue of €750 million or more. It doesn't touch a typical owner-managed company.

Second, the filing calendar got tighter along with the rate. From tax year 2026, the corporate return and the final self-assessed tax are both due by 31 January of the second year after the tax year. So the 2026 return and its tax are due by 31 January 2028. The 2025 return keeps its old deadline of 31 March 2027.

What is the new SDC rate on dividends?

5%, for dividends paid out of profits earned from 2026. SDC, the Special Defence Contribution, is a Cyprus tax on dividends and interest, separate from income tax. On dividends, individuals pay it only if they are tax resident and domiciled in Cyprus. For them, SDC on dividends from tax year 2026 profits is 5%, down from 17%. Non-doms and non-residents still pay no SDC on dividends, exactly as before.

One charge applies to everyone, non-doms included. GeSY, the national health system contribution, is still due on dividends at 2.65%, on total annual income up to €180,000. On a dividend from a Cyprus company, the company withholds both the SDC and the GeSY before paying you. The reform didn't touch GeSY.

What it did abolish, quietly, is SDC on rental income. The reform's SDC amendment law removed rents from the SDC Law entirely from 1 January 2026. Landlords now pay income tax on rents with no separate SDC on top.

Is deemed dividend distribution really abolished?

Yes, for profits earned from tax year 2026 onwards. Deemed dividend distribution (DDD) treated 70% of a company's after-tax profit as paid out to its Cyprus-resident, domiciled shareholders two years after the profit year. It didn't matter whether you declared a dividend. SDC was charged on the deemed payout anyway. Now you can keep new profits in the company for as long as you like, with no deemed payout.

The old years still have a tail. Under the new transitional article 3Γ, 70% of the 2024 profits is deemed distributed on 31 December 2026, and 70% of the 2025 profits on 31 December 2027. Both are charged 17% SDC. In each case, dividends actually paid from those profits reduce the deemed amount. The company pays the SDC with a declaration by 31 January of the third year after the profit year, then recharges it to the shareholders. A non-resident who held the shares on 31 December 2025, and later receives a real dividend from those profits, can reclaim the DDD SDC that relates to it.

What is the new charge on disguised distributions?

It's a new SDC charge on value that leaves the company informally, at 10%, double the new dividend rate. It is the price of the dividend cut. It catches the market value of company assets that a shareholder or a connected person uses personally. It also catches the shortfall when the company sells an asset to a shareholder below market value. The charge reaches indirect shareholders too, and the SDC paid on it can't be refunded.

The company must also give each shareholder a certificate of any disguised distribution and the SDC withheld on it. The design is deliberate. A declared dividend from new profits is now cheap, and taking value out informally costs twice as much.

Is stamp duty abolished in Cyprus?

Yes. The Stamp Duty Laws of 1963 to 2024 are repealed in full from 1 January 2026, for every type of document. Contracts and agreements signed from that date carry no Cyprus stamp duty. Documents signed before 2026 keep whatever stamping obligations they already had.

For companies, a whole chore is gone from deal paperwork. No stamping runs, no stamping deadlines, and no penalty sums for late stamping on new documents.

What are the new personal income tax bands?

From tax year 2026, the bands are 0% up to €22,000, 20% on €22,001 to €32,000, 25% on €32,001 to €42,000, 30% on €42,001 to €72,000, and 35% above €72,000. Before, the tax-free threshold was €19,500 and the top band started at €60,000. Returns for 2025, filed during 2026, still use the old bands.

The reform also added deductions that depend on your income. There's an amount per child, up to €2,000 per spouse for rent or mortgage interest on your main home, and up to €1,000 for energy upgrades and electric vehicles. A further deduction of up to €500, for insuring your main home against natural disasters, has no income test.

More people now have to file, too. From tax year 2026, every Cyprus-resident individual aged 25 to 70 must file a personal return by 31 July of the following year, regardless of income.

Owner-directors will see the effect in payroll. A salary that had tax withheld under the old bands may now have little or none. Together with the new 5% SDC, that shifts the best split between salary and dividends. Run the numbers again for 2026 rather than reusing last year's answer. Our salary versus dividends guide walks through the full calculation.

Did non-dom status change?

Barely. The regime survives intact, with one new option at the end. Non-dom status is for Cyprus tax residents whose domicile is elsewhere, and it keeps them outside SDC on dividends and interest. You only become deemed domiciled in Cyprus after 17 of the 20 years preceding the tax year, so the exemption still runs for up to 17 years.

The new option comes when those years run out. Someone without a Cyprus domicile of origin who becomes deemed domiciled can choose to pay a flat SDC of €250,000 per five-year block, for at most two blocks. You pay it in one instalment, and it covers all your SDC for those five years. The choice can't be undone. You make it on form T.D.631 by 30 June of the block's first year. Whether it pays off depends entirely on the dividend and interest income you expect, so it's worth an hour with an adviser. Our non-dom guide covers the regime in full.

Did the 60-day rule change?

Yes, it's easier to qualify. From tax year 2026, the condition that you must not be tax resident in any other country is removed from the 60-day rule. Four conditions remain:

• at least 60 days in Cyprus
• no more than 183 days in total in any other single country
• a business, a job or an office with a Cyprus tax-resident person, held through the year
• a permanent home in Cyprus that you own or rent

For founders who move around, this fixes the rule's most awkward edge. Another country claiming you as resident no longer rules you out of Cyprus residency by itself. The tax treaty between the two countries now settles competing claims.

What else is in the reform?

A few smaller changes move no headline number but are worth knowing:

• Tax losses carry forward for seven years from tax year 2026, up from five. Losses from 2019, which would have expired against 2024 profits, can now be set against 2026 profits.
• Gains on selling crypto-assets are taxed at a flat 8% from tax year 2026. Crypto losses can only be set against crypto gains in the same year.
• Benefits from employee share and option plans approved by the Tax Commissioner are taxed at a flat 8%, with a minimum three-year vesting period and a €1,000,000 cap per rolling ten years.
• The cap on deducting entertainment costs rose to the lower of 1% of gross income and €30,000 from tax year 2026, up from €17,086.
• Every company incorporated in Cyprus is now Cyprus tax resident by default from tax year 2026, unless a double tax treaty says otherwise. Being managed and controlled from Cyprus still makes a company resident on its own.

How Sumly handles the transition

The reform put real money on one question. Which year did this profit come from? That's a bookkeeping question. Sumly keeps your books up to date through the year, so retained earnings sit in the accounts by period, not in one pile. Every entry stays linked to the document behind it. Ask Sumly AI what a distribution would cost, and the answer comes with the figures behind it, from your own books. Sumly prepares provisional tax and the corporate return from those same books, at the current rates. Once a period is filed it locks, so the numbers you submitted can't shift under next year's comparison.

What should a company owner do now?

1. Re-estimate your 2026 provisional tax at 15%. Provisional tax is the tax you pay in advance on your expected profit. The instalments fall due on 31 July and 31 December. If your estimate turns out below 75% of the final figure, a 10% additional charge applies to the shortfall.
2. Tag retained earnings by profit year. A dividend from 2025 profits costs 17% SDC through 2031. A dividend from 2026 profits costs 5%. Your books must be able to tell them apart.
3. Put the DDD dates in your cash plan. If domiciled shareholders have 2024 or 2025 profits in the company, 31 December 2026 and 31 December 2027 are live deadlines, with SDC payable the following month.
4. Run salary versus dividends again. The €22,000 threshold, the new bands and the 5% SDC all move the best split, and the answer differs for doms and non-doms.
5. Keep personal use of company assets clean. The 10% charge on disguised distributions makes the company car at the villa, and the below-market asset sale, expensive habits.

Starting a company under the new rules? Begin with how to register a company in Cyprus. Weighing who should keep the books? Do you need an accountant? lays out the options, and pricing shows what the software route costs.

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