Tax Reform – 31.12.2025

Tax Reform – 31.12.2025

Summary of the main legislative amendments

Law Repealing the Stamp Duties Laws of 1963 to 2025

The Stamp Duties Laws of 1963 to 2024 are repealed as of 1 January 2026.

Law Amending the International Trusts Laws of 1992 to 2013

The provision requiring stamp duty on the Deed of Establishment of an International Trust is abolished.

Law Amending the Collection of Taxes Laws of 1962 to 2025

Authority is granted to the Commissioner of Taxation to impose “freezing of shares for outstanding tax liabilities” (Article 9ST), subject to specific conditions and procedures.

Law Amending the Capital Gains Tax Laws of 1980 to (No. 2) of 2025

• New definitions introduced for “immovable property” and “regulated market”.

• The scope of the law is expanded to cover indirect ownership of immovable property; the threshold is reduced from 50% to 20%.

• The tax-free threshold on disposal of property by individuals increases to €30,000.

• The tax-free threshold on disposal of agricultural land by individuals whose main occupation is farming increases to €50,000.

• The tax-free threshold on disposal of a primary residence increases to €150,000.

• All gains from disposal of shares listed on a regulated market of a recognised stock exchange are exempt.

  • For non-regulated markets, an exemption of up to €50,000 cumulatively per year applies, unless exceeded, in which case the full gain is taxable—except for shares held as at 31.12.2025, which remain fully exempt.

• In restructurings and other cases already provided by law, the exemption on disposal of a primary residence increases to €450,000. These exemptions apply until 31.12.2030.

• The 9% interest is abolished and replaced by the Unified Public Default Interest Rate Law.

• Where shares are disposed of and their market value substantially derives from immovable property, the proceeds of disposal of the shares (as declared by the parties) are treated as proceeds of disposal of the property, adjusted for other assets and liabilities.

• Exchange consideration, under specific conditions, is exempt from taxation, similar to exchanges.

• Increases in monetary penalties and surcharges.

Law Amending the Assessment and Collection of Taxes Laws of 1978 to 2025

• Mandatory filing of tax returns for individuals aged 25 to 71, regardless of income level.

• Deadline for filing returns with audited financial statements changes from 31 March to 31 January.

• Record-keeping period extended: six (6) years calculated from the latest of the filing date of the original or revised return.

• Notices by the Commissioner and submission of objections may be made electronically.

• Changes to conditions for filing revised returns during audits; the Commissioner may accept revised returns at any time.

• The Annual Employer’s Return to be submitted by end of March (instead of end of February); expanded reporting fields; the Commissioner’s look-back period increases from 5 to 6 years.

• Expanded automatic information reporting on interest payments by banks; submissions every six months; inclusion of spouse and first-degree relatives in certain bank account audits.

• Authority for the Commissioner to request information from Cypriot Financial Institutions for Cyprus tax residents.

• Obligation for each partner and the partnership to file tax returns.

• Abolition of 1 August as the payment date for prior-year tax for persons required to prepare accounts; self-assessment applies with filing on 31 January.

• Objection period extended to 60 days from service of assessment.

• The six-year assessment period now runs from the later of the filing date of the original or revised return.

• Threshold for audited financial statements for individuals increases from €70,000 to €120,000.

• Power to suspend business operations and seal premises (subject to conditions and procedure).

• Abolition of 9% interest; application of the Unified Public Default Interest Rate Law.

• Persons who begin earning non-employment income after 30 June may pay a single instalment of provisional tax unless otherwise required by the Commissioner.

• Mandatory payment of rent via bank account.

• Changes regarding directors’ liability (legal clarifications pending):

  • A person bearing criminal liability for an offence committed by a legal person is jointly and severally liable with the legal person in civil proceedings.

  • Regardless of the Companies Law, a director remains liable for obligations arising during their term, even if removed from the register at the time proceedings commence.

• Increases in monetary penalties and surcharges.

Law Amending the Income Tax Laws of 2002 to (No. 3) of 2025

• Additional categories of benefits/income become taxable under Article 5.

• Crypto-assets are explicitly taxable.

• Retirement gratuity / pension commutation removed from tax exemptions.

• Redemption of units or shares in collective investment schemes is treated as a dividend, not a disposal of title.

• Extension of deductions for scientific research and R&D expenses from 2025 to 2030.

• Deduction up to €50,000 for donations to approved cultural institutions.

• Additional deduction equal to double the incremental employer cost for COLA (ATA) compared to the previous year.

• Extension to 2030 for capital allowances on electric vehicles.

• Increase of the cap for business entertainment expenses to €30,000 (1% remains).

• Loss carryforward extended from 5 to 7 years.

• New taxation regime for stock options at a reduced rate of 8%.

• New taxation regime for crypto-assets at a reduced rate of 8%.

• New taxation regime for gratuity payments to employees and officers.

• Increase of thresholds for the Cyprus Transfer Pricing Documentation File:

  • Goods transactions: €5,000,000

  • Financing transactions: €10,000,000

• Personal income tax bands:

  • Up to €22,000: 0%

  • €22,001–€32,000: 20%

  • €32,001–€42,000: 25%

  • €42,001–€72,000: 30%

  • Above €72,000: 35%

• Introduction of deductions for children, interest on qualifying housing loans, energy-efficiency upgrades of the primary residence, and purchase of electric vehicles, subject to income criteria.

• Corporate tax rate set at 15%.

• Increases in monetary penalties and surcharges.

Law Amending the Special Defence Contribution (SDC) Laws of 2002 to (No. 3) of 2025

• Article 3 is fully redrafted, abolishing prior provisions on deemed dividend distribution and rents, and introducing taxation of actual dividends and interest.

• SDC applies to actual dividend distributions to Cyprus tax residents at 5%, with transitional rules and anti-avoidance clauses allowing 17% in certain cases.

• Extension of Non-Domicile status provisions:

  • Individuals deemed domiciled in Cyprus may opt for an alternative SDC regime by paying a flat annual amount of €50,000, regardless of income level.

• The election is irrevocable and binding for five (5) consecutive tax years.

• Increases in monetary penalties and surcharges.

Disclaimer

The above summary provides a concise overview of the main legislative changes (and not necessarily all of them), based on our initial review and prior to the issuance of any explanations, interpretative circulars, or further guidance by the Tax Department. Accordingly, we reserve the right to amend the above insofar as our analysis and understanding may change. This summary does not constitute advice or guidance for tax planning and/or compliance. Taxpayers are advised to carefully review the new legislation and seek professional advice. Our firm accepts no responsibility where any person applies tax practices based solely on the above without further study and professional guidance.