What the New Cyprus Tax Rules Mean for Property Owners and Tax Residents

Property & Real Estate–Related Tax Changes in Cyprus

Stamp Duty Abolished

As part of the reform, stamp duty on property transactions will be fully abolished, reducing purchase costs and improving affordability for those buying property in Cyprus.

Rental Income: SDC Abolished

For landlords and investors, the Special Defence Contribution (SDC) on rental income is abolished, significantly increasing net rental returns and strengthening the appeal of buy-to-let property in Cyprus.

Capital Gains Tax Updates

Key changes to Cyprus Capital Gains Tax (CGT) include:

• Expansion of the definition of companies owning immovable property in Cyprus, with the ownership threshold reduced from 50% to 20%
• Higher tax exemptions on the disposal of a main residence and other immovable property

These changes provide additional flexibility for both homeowners and property investors.

Cyprus Tax Residency & Individual Income Tax Changes

Higher Tax-Free Income Threshold

The reform increases the individual tax-free income threshold from €19,500 to €22,000, offering relief to employees, self-employed individuals, and families establishing tax residency in Cyprus.

Updated Cyprus Personal Income Tax Bands

• 0%: €0 – €22,000
  
• 20%: €22,001 – €32,000
  
• 25%: €32,001 – €42,000
  
• 30%: €42,001 – €72,000
  
• 35%: €72,001 and above

New Deductions Supporting Homeownership

New deductions have been introduced for:

• Dependent children
• Main residence costs
• Energy-efficient home upgrades
• Electric vehicles

These incentives support long-term residence, sustainable housing, and family living in Cyprus.

Special Defence Contribution (SDC) on Dividends

For Cyprus tax resident domiciled individuals:

•  SDC on dividends reduced from 17% to 5%
• Deemed Dividend Distribution abolished for profits generated from 2026 onwards
  

This improves tax efficiency for business owners and investors residing in Cyprus.

Corporate Tax & Business Incentives

• Corporate Income Tax (CIT) increases from 12.5% to 15%
  
• Tax loss carry-forward extended from 5 to 7 years
  
• 20% super-deduction for Research & Development (R&D) expenses for the period 2025–2030
  
• Allowable entertainment expenses increased to €30,000
  
• Flat 8% tax on employee share option schemes (subject to conditions)
  
• Flat 8% tax on cryptocurrencies
•  

These measures aim to balance competitiveness with transparency while supporting innovation and long-term economic growth.

Compliance & Regulatory Changes

Additional measures introduced under the Cyprus tax reform include:

• Mandatory income tax return filing for all Cyprus tax residents aged 25 to 71, regardless of income
• Rent payments permitted only via electronic methods, with cash payments prohibited
• Increased penalties and fines for non-compliance
• Expanded enforcement powers for the Commissioner of Taxation
  

What This Means for the Cyprus Property Market

The Cyprus tax reform 2026 introduces greater clarity, lower property transaction costs, and improved incentives for homeowners and investors. With stamp duty abolished, rental income no longer subject to SDC, and enhanced exemptions for main residences, the reforms are expected to support sustained demand across the Cyprus real estate market.

For individuals considering relocation, property investment, or tax residency in Cyprus, the new framework offers long-term certainty and planning opportunities.