Nicosia: The new tax system for businesses and individuals in Cyprus will come into effect on Thursday, January 1, 2026. On December 22, 2025, the plenary of the House of Representatives passed the tax reform, approving five of the six bills submitted by the executive branch. These bills were amended following discussions in the Parliamentary Committee on Finance and Budget.
According to Cyprus News Agency, the laws related to the tax reform, as approved by the House plenary, were published in the Official Gazette of the Republic on Wednesday. The Cyprus Employers and Industrialists Federation (OEB) played a significant role in shaping the final amendments. Their contributions were made during both the public consultation phase and the detailed discussions before the Parliamentary Committee on Finance, aiming to support the Cypriot economy through tax reform, enhance the competitiveness of Cypriot businesses, and maintain the country's appeal to foreign investors.
Among the key changes introduced in the Tax Reform are an increase in corporate tax from 12.5% to 15%, a reduction in withholding tax on actual dividend distributions from 17% to 5%, and the complete abolition of both deemed dividend distributions and the Stamp Duty Laws. A new provision addresses the Director's liability for the duration of their tenure in a company, extending even after resignation. Additionally, the transfer of a piece of land for dividing plots will now be considered an exchange.
The reform also reduces the special defence contribution on interest from bonds of companies listed on the Stock Exchange's New Market, decreasing it from 17% to 3%. It grants a notional deduction to companies providing a Cost-of-Living Adjustment (CoLA) and introduces a share blocking procedure for tax debts. Furthermore, all tax residents of Cyprus over the age of 25 will be required to file tax returns, irrespective of their tax liability.
The tax scales for natural persons have been revised: 0% up to £22,000, 20% between £22,001 and £32,000, 25% between £32,001 and £42,000, 30% between £42,001 and £72,000, and 35% for £72,001 and above. Additional deductions for children, home insurance, and mortgage interest have also 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.