Global Daily Tax News, Cypriot Lawmakers Sign Off On Landmark Tax Reform, (Dec 24, 2025)

After months of debate, the Cypriot Government has secured approval from lawmakers for a major overhaul of the territory's tax regime, including a corporate tax rate hike.

The tax reform includes an increase to the corporate income tax rate from 12.5 percent to 15 percent, and an extension to the loss carryforward period from five years to seven years with added conditions (a ten-year period was initially proposed).

The special defence contribution rate for dividends income received by Cypriot tax resident or domiciled individuals will be lowered from 17 percent to five percent, and the deemed dividend distribution rules will be abolished.

Personal income tax bands will be revised, establishing a new EUR72,000 bracket for the top, 35-percent income tax rate, up from EUR60,000, and lower than the EUR80,000 initially proposed, and the personal income tax-exempt threshold will rise to EUR22,000 up from EUR19,500 – higher than the initially proposed level of EUR20,500.

The current 20-percent rate of personal income tax will apply to income above the tax-exempt threshold to EUR32,000, up from GBP28,000 (original proposal: EUR30,000); the 25-percent rate will apply therefrom on income up to EUR42,000, up from EUR36,300 (original proposal: EUR40,000); and the 30-percent rate will then apply to income until the 35-percent rate applies, on income up to EUR72,000 (original proposal: EUR80,000).

The reform package also considerably alters the tax relief measures available for households with children, and raises capital gains tax allowance to EUR30,000 for general land sales, to EUR50,000 for agricultural plots, and to EUR150,000 for primary residences. It also includes numerous tax enforcement-related measures.