TaxLegi 26.02.2026

On 31 December 2025 various amendments in the Cypriot tax laws were published in the Official Gazette of the Republic as part of the Tax Reform. The tax reform aimed interalia to improve tax compliance, support economic growth, create a more equitable tax system and provide various tax reliefs to individuals.

Overview of changes from a Personal Tax Perspective

Income Tax Law

• Tax Residency under the 60-days rule: the condition that an “individual is not a tax resident in any other country for the same tax year” has now been removed.
• Obligation to submit personal Income Tax Return (Form T.D.1) applies to tax residents of Cyprus:
  • If they have gross income that is specifically provided in the Income Tax Law; and/ or
  • If they have reached the age of 25 but not yet reached the age of 71 by the end of the tax year (31 December).
• The tax-free threshold has increased from € 19,500 to € 22,000.
• The threshold of the annual income for a person who has the obligation to prepare audited/ reviewed financial statements has increased from € 70k to € 12Ok.

The updated tax bands and rates are shown in the table below:

Chargeable Income €	Tax Rate	Accumulated Tax €
0-22.000	0%	0
22.001-32.000	20%	2.000
32.001-42.000	25%	4.500
42.001-72.000	30%	13.500
Over 72.001	35%

The scope of taxation article has now been amended to provide for the taxation of:

• Any allowances;
• Incentives for accepting employment or appointment to a position;
• A gratuity granted as a gift upon retirement, or early retirement, or the expiration or early termination of an employment contract or appointment to a position)*;
• Benefits granted under an early retirement plan for employees*;
• Compensation for the termination of employment or appointment to a position*;
• Any other benefit granted under an employment or an appointment contract.

*: any amount that exceeds €200K is taxed at a fixed tax rate of 20%

Amounts receivable, including compensation, which are paid in accordance with a court decision, and which relate to any of the above, constitute taxable income and are taxed accordingly.

Personal allowances based on family income criteria:

Personal allowances may be available to individuals whose family income does not exceed:

• €100.000 for a family with no children; or
• €100.000 for a family with up to 2 children; or
• €150.000 for a family with 3 or 4 children; or
• €200.000 for a family with 5 children or more; or
• €40.000 in case of a single person.

The allowances available, subject to conditions, are the following:

• Applicable for each parent, an allowance of €1.000 for the first dependent child, an allowance of €1.250 for the second dependent child, and €1.500 for the third child and every additional dependent child as at 31 December of the tax year.
• Up to €2.000 to each spouse or partner, or single person in respect of:
  • expenditure for interest paid on a performing loan for the purchase of a primary residence located in the Republic; or
  • expenditure for rent paid in relation to the use of a primary residence located in the Republic.
• Up to €1.000 for each spouse, partner or single person in respect of the total of:
  • Capital expenditures incurred to improve the energy efficiency of a primary residence located in the Republic;
  • Capital expenditure incurred for technical energy efficiency systems of the primary residence, renewable energy systems, as well as batteries for storing electrical energy;
  • Capital expenditures incurred for electric vehicles registered with the Department of Road Transport.

Allowable Insurance Deductions

Α deduction up to EUR 500 for home insurance policies relating to natural disasters, without threshold limitations as to the family income, is available to individuals.

Furthermore, the following are available:

• Deductions are permitted for insurance premiums paid starting January 1, 2026, for coverage of permanent and/or temporary total disability, subject to specific conditions and limitations.
• For premiums paid for a Pension Plan or for the provision of an annual life annuity upon retirement, which is approved by the Commissioner, a deduction may be available which shall not cumulatively exceed an amount equal to 10% of the individual’s total income (including profit from the carrying on of a business) which is not exempt from income tax.
• For premiums paid for a Health care Plan, which is approved by the Commissioner, the deduction granted shall not cumulatively exceed an amount equal to 2% of the individual’s total income (including the profit from the carrying on of a business) and which is not exempt from income tax.

Special tax regimes

Overseas pension income

• The taxpayers have the option to elect every year whether their pension from outside the Republic will be taxed under the normal tax rates or with a special tax rate of 5% for each euro exceeding €5.000.

Crypto Assets

A flat tax rate of 8% is applied on gains derived by any person from:

• The sale of a crypto-asset;
• The gift of a crypto-asset;
• Exchange of a crypto asset with another crypto-asset;
• The use of a crypto asset as means for making payments.

Losses incurred from crypto-assets can only be set-off with gains from crypto-assets within the same tax year. Any gains on crypto-assets may not be considered as capital nature gains (i.e., tax is imposed regardless of trading or capital nature).

Share Option Schemes

• Stock options granted under an approved by the Tax Commissioner scheme are taxed with a flat tax rate of 8% (subject to conditions).
• The maximum amount taxable under such schemes is €1m over a 10-years period.
• For existing schemes, employers must apply to the Tax Department within 6 months (until 30 June 2026) seeking the approval of the Tax Commissioner.

Capital Gains Tax (CGT)

The lifetime exemption thresholds, which reduce the taxable gains for CGT purposes, have been revised as follows:

• The threshold for immovable property has increased to € 30,000 from € 17,084.
• The threshold for agricultural land, applicable to individuals engaged in agriculture, has been raised to € 50,000 from € 25,629.
• For primary residences, the new threshold is €150,000, up from € 85,430.

Regarding the exchange of immovable property, the Cyprus CGT Law includes any exchanges with a land developer for:

• The construction of a building, or
• The division of a plot (subject to the issuance of title deeds).

The conditions for exemption state that the completion of development or issuance of title deeds must occur within five years from the date of the agreement; after this period, no exemption will apply.

Special Defense Contribution (SDC)

Non-Domiciled Status in Cyprus

• An individual whose non-domicile status has expired may choose to be subject to an alternative way of SDC for up to two five-year periods by making an upfront payment of € 250,000 per five-year period.
• The Law now provides that a non-dom individual whose non-dom status has expired maintains such a domicile status up until the completion of 20 years during which s/he is not tax resident of Cyprus.

Rental income

• Starting from January 1, 2026, rental income will not be subject to Special Defense Contribution and will only be subject to Income Tax and GHS contributions (subject to conditions).

Dividend Income

• Cyprus tax resident domiciled individuals receiving dividends (from Cypriot and non-Cypriot tax resident companies) is subject to 5% SDC. See also below.
• Dividends subject to SDC are reduced with any amount of deemed dividends and with any dividend income that was already subjected to SDC.
• Cyprus tax resident and domiciled individuals receiving dividends from a Cypriot tax resident company within a period of six years as of the date of enactment of the tax reform (i.e. up to 31 December 2031) and which are issued from profits of tax years up to and including 2025 are subject to 17% SDC.

Constructive dividends

Every individual that is a resident and domiciled of Cyprus is liable to SDC on constructive dividends that he/ she is deemed to receive from a company that is tax resident of Cyprus, in which he/she is a shareholder, at the rate of 10%.

The amount of the constructive dividend is equal to the sum of:

a) The market value of a company asset used by the individual shareholder or by an individual who is related to the shareholder.

b) The difference between the market value of any asset that is disposed by a company to an individual who is a shareholder of that company, or to a person related to him, and the amount of consideration paid.

The SDC law provides further guidance on how the above amounts are to be calculated. No amount of SDC paid on constructive dividends shall be refunded. Constructive dividends should be reported in the same manner as any other dividends.

Interest Income

• Interest income earned by individuals will no longer be subject to income tax and it will instead be subject to a 17% SDC, unless it is derived from specific Cyprus or EU government/local authority securities or certain listed securities, in which case the SDC rate will be 3%.

Statutory Tax Deadlines

• Submission of the Income Tax Return (Form T.D.1) by individuals required to prepare audited financial statements: 31 January of the year, after the end of the year that follows the tax year.
• The deadline for the payment of the final tax through self-assessment is also 31 January of the year after the end of the year that follows the assessment year. For example, for the 2026 tax year, the relevant deadline would be 31 January 2028 (Form T.D.1).
• The deadline for the submission of the Income Tax Return (Form T.D.1) by individuals who do not prepare audited financial statements as well as the payment of any outstanding tax liability remains unchanged to 31 July of the year, following the tax year the Income Tax Return relates to.

Imposition of monetary charges

Penalties for non-compliance with a specified deadline or failure to fulfill a duty which the law provides or to comply with a formal request of the tax department have increased.

EY Cyprus is at your disposal for any information and/or clarifications required.     

For additional information, please contact our team:

Petros Liassides

Partner – Direct Tax

Phone: +357 96 795 007

Petros.Liassides@cy.ey.com

 

Michalis Karatzis

Director – People Advisory Services Tax

Phone: +357 25 209 726

Michalis.Karatzis@cy.ey.com

 

Herodotos Hadjipavlou,

Senior Manager – People Advisory Services Tax

Phone: +357 22 209 788

Herodotos.Hadjipavlou@cy.ey.com

 

Maria Varvatsi

Assistant – People Advisory Services Tax

Phone: +357 22 051 519

Maria.Varvatsi@cy.ey.com

 

Petros Tsiakkouris

Assistant – People Advisory Services Tax

Phone: +357 25 209 712

Petros.Tsiakkouris@cy.ey.com

 

    

                                                                                 

According to the announcement issued by the Tax Department on 26 January 2026, Μηνιαίες και Ετήσιες Δηλώσεις Παρακράτησης Φόρου Εισοδήματος Εργοδότη.pdf the Tax Department informs all employers of their obligations regarding the submission of the Monthly and Annual Tax Withholding and Employer Contributions Declarations. At the same time, it announces the new deadlines for the submission of these declarations as well as the remittance of the relevant income tax and contributions.

Obligation to Submit the Annual and Twelve (12) Monthly Employer Tax Withholding and Contributions Declarations:

This obligation applies only to employers who, on a monthly basis, withhold and remit to the Tax Department Income Tax and/or GHS contributions (GeSY) and/or the employer’s GHS contributions. It is noted that the submission of the monthly declaration must precede the payment of the withheld amounts, as the liabilities are generated in the TaxForAll (TFA) system through the submitted declaration. It is recommended that individuals with no withholdings are also included in the monthly declarations, otherwise, their annual income will need to be reported in the last declaration of the year (i.e. December).

Obligation to Submit the Annual Declaration and at Least One (1) Monthly Employer Tax Withholding and Contributions Declaration:

Employers who have employees and/or officers (Directors/Secretaries) receiving remuneration without any withholdings payable to the Tax Department (Income Tax and/or GHS contribution and/or the employer’s GHS contribution) are required to submit an Annual Declaration and at least one Monthly Tax Withholding and Contributions Declaration.

*Recipients of notifications relating to the above matter who are not required to submit the said Returns are kindly requested to disregard them.

For further facilitation of Employers’ compliance, the following deadlines will apply in relation to the submission of the Tax Withholding and Employer Contributions Declarations as well as the payment of the corresponding taxes and contributions:

Ø  Monthly Tax Withholding and Employer Contributions Declaration for the period July 2025 to December 2025 may be submitted up to 31 March 2026.

Ø  The Annual Tax Withholding and Employer Contributions Declaration for the year 2025 may be submitted up to 31 May 2026.

Ø  The deadline for the Annual Tax Withholding and Employer Contributions Declaration for the year 2024 remains 31 March 2026.

 EY Cyprus is at your disposal for any information and/or clarifications required. 

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Σύμφωνα με την ανακοίνωση που εξέδωσε το Τμήμα Φορολογίας στις 26 Ιανουαρίου 2026, με τίτλο Μηνιαίες και Ετήσιες Δηλώσεις Παρακράτησης Φόρου Εισοδήματος Εργοδότη.pdf, το Τμήμα Φορολογίας ενημερώνει εκ νέου όλους τους εργοδότες σχετικά με τις υποχρεώσεις τους αναφορικά με την υποβολή των Μηνιαίων και Ετήσιων Δηλώσεων Παρακράτησης Φόρου και Εισφορών Εργοδότη. Παράλληλα, γνωστοποιεί τις νέες καταληκτικές ημερομηνίες για την υποβολή των εν λόγω δηλώσεων.

Υποχρέωση υποβολής Ετήσιας και Δώδεκα (12) Μηνιαίων Δηλώσεων Παρακράτησης Φόρου και Εισφορών Εργοδότη:

‘Eχουν μόνο οι εργοδότες που, σε μηνιαία βάση, παρακρατούν και καταβάλλουν στο Τμήμα Φορολογίας Φόρο Εισοδήματος, και/ή εισφορά ΓεΣΥ, και/ή εισφορά εργοδότη στο ΓεΣΥ. Επισημαίνεται ότι η υποβολή της μηνιαίας δήλωσης πρέπει να προηγείται της πληρωμής, καθώς μέσω αυτής δημιουργούνται οι οφειλές στο TFA. Συνιστάται όπως στις μηνιαίες δηλώσεις περιλαμβάνονται και άτομα χωρίς παρακράτηση, διαφορετικά τα ετήσια εισοδήματά τους θα πρέπει να δηλωθούν στην τελευταία δήλωση του Δεκεμβρίου.

Υποχρέωση υποβολής Ετήσιας Δήλωσης και τουλάχιστον μίας (1) Μηνιαίας Δήλωσης Παρακράτησης Φόρου και Εισφορών Εργοδότη:

‘Eχουν οι εργοδότες που έχουν εργοδοτούμενους ή/και αξιωματούχους (Διευθυντές/Γραμματείς) με απολαβές ΧΩΡΙΣ παρακρατήσεις καταβλητέες στο Τμήμα Φορολογίας (Φόρου Εισοδήματος, ή/και εισφορά ΓεΣΥ, ή/και εισφορά εργοδότη στο ΓεΣΥ).

* Όσοι έχουν λάβει σχετικές με το πιο πάνω θέμα ειδοποιήσεις από το Τμήμα Φορολογίας και δεν έχουν υποχρέωση υποβολής των εν λόγω Δηλώσεων, παρακαλούνται όπως τις αγνοήσουν.

Για την περαιτέρω διευκόλυνση της συμμόρφωσης των Εργοδοτών, παρέχεται η δυνατότητα υποβολής των Δηλώσεων Παρακράτησης Φόρου και Εισφορών Εργοδότη και καταβολής φόρων και εισφορών που αντιστοιχούν σε αυτές, ως ακολούθως:

Ø  Μηνιαίες Δηλώσεις Παρακράτησης Φόρου και Εισφορών Εργοδότη Ιουλίου 2025-Δεκεμβρίου 2025 μέχρι και την 31^η Μαρτίου 2026

Ø  Ετήσια Δήλωση Παρακράτησης Φόρου και Εισφορών Εργοδότη για το έτος 2025 μέχρι και την 31^η Μαΐου 2026

Ø  Ετήσιας Δήλωσης Παρακράτησης Φόρου και Εισφορών Εργοδότη για το έτος 2024 παραμένει η 31^η Μαρτίου 2026.

 

Η ΕΥ Κύπρου είναι στη διάθεσή σας για οποιεσδήποτε περαιτέρω πληροφορίες ή διευκρινήσεις πιθανό να χρειαστείτε.

 

For additional information, please contact our team:

Petros Liassides

Partner, Tax Services

Phone: +357 96 795 007

Petros.Liassides@cy.ey.com

 

Michalis Karatzis,

Director, People Advisory Services Tax

Phone: +357 25 209 726

Michalis.Karatzis@cy.ey.com

 

Katia Argyridou,

Senior Manager, People Advisory Services Tax

Phone: +357 22 209 886

Katia.Argyridou@cy.ey.com

 

Herodotos Hadjipavlou,

Senior Manager – People Advisory Services Tax

Phone: +357 22 209 788

Herodotos.Hadjipavlou@cy.ey.com

 

Ioanna Dimitriou,

Assistant, People Advisory Services Tax

Phone: +357 22 051 645

Ioanna.Dimitriou@cy.ey.com