The new tax system for businesses and individuals comes into effect on Thursday, January 1, 2026.
On December 22, 2025, the plenary of the House of Representatives passed the tax reform, voting in favour of five of the six bills submitted by the executive branch, as amended following discussions in the Parliamentary Committee on Finance and Budget.
According to a circular issued by the Cyprus Employers & Industrialists Federation (OEB), the laws relating to tax reform, as voted by the House plenary, were published in the Official Gazette of the Republic on Wednesday.
As stated, OEB contributed substantially and substantively to the final formulation of the amendments, both during the public consultation stage and during the article-by-article debate before the Parliamentary Committee on Finance, with the aim of "to support the Cypriot economy through tax reform, to strengthen the competitiveness of Cypriot businesses and to maintain the country's attractiveness to foreign investment".
According to the Federation, among the most notable changes included in the Tax Reform are the increase in corporate tax from 12.5% to 15%, the reduction of withholding tax on actual dividend distributions from 17% to 5%, the complete abolition of deemed dividend distributions, and the complete abolition of the Stamp Duty Laws.
A provision is also introduced regarding the liability of the Director for the entire period during which they held the position in the company, even after resignation, while a provision is also included according to which the transfer of a piece of land for the purpose of dividing plots is also considered as an exchange.
There is also a provision for a reduction in the special defence contribution on interest from bonds of companies listed on the Stock Exchange’s New Market, from 17% to 3%, granting of a notional deduction to companies that will grant Cost-of-Living Adjustment (CoLA), and the introduction of a share blocking procedure in cases of tax debts.
It is also mandatory for all tax residents of Cyprus over the age of 25 to file tax returns, regardless of whether they have a tax liability.
At the same time, the tax scales for natural persons are amended 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 €72,001 and above.
In addition, deductions for children, home insurance, mortgage interest, etc. have been included.
"OEB will continue to closely monitor the implementation of the Tax Reform and will inform its members of any further clarifications, regulatory acts, or interpretative circulars issued by the competent authorities," the circular concludes.
CNA/KA/EPH/2025
ENDS, CYPRUS NEWS AGENCY
