Cyprus has approved a tax reform that will raise the corporate tax rate to 15% whilst cutting the personal tax burden through increased allowances for families and housing.
The House of Representatives passed the bills following a two-year consultation process, with changes taking effect on 1 January 2026. The ministry called the reform a “flagship initiative” aimed at creating a fairer, more efficient and sustainable economic system.
The corporate tax rate will rise from 12.5% to 15%, ending Cyprus’s position amongst the European Union’s lowest corporate tax jurisdictions. However, businesses will benefit from the complete abolition of the deemed dividend distribution system and a sharp cut in withholding tax on actual dividend payments from 17% to 5%. Stamp duty will be eliminated entirely, exemptions for capital gains tax will increase, and stock options will receive favourable treatment.
For individuals, the tax-free threshold increases from €19,500 to €22,000, with tax brackets adjusted accordingly. Families will receive significant new allowances: €1,000 per parent for the first child, €1,250 for the second child, and €1,500 for the third and subsequent children.
The reform introduces a €1,000 allowance per spouse or partner for housing and green expenses, plus up to €2,000 annually per spouse for rent and mortgage interest on serviced housing loans.
The finance ministry said the changes provide targeted support for families with children and students, whilst strengthening measures that support households’ green transition and the state’s housing policy. The reform maintains Cyprus’s attractive investment environment through a competitive tax system that supports entrepreneurship, the ministry added.
The government said the overhaul implements President Nikos Christodoulidis’s vision for a fairer, more productive and resilient Cyprus, with a tax system supporting the middle class and creating opportunities for young people, families and businesses.
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