This reform introduces extensive changes to the Cyprus tax framework, aiming to modernise the system, enhance fairness, and boost economic competitiveness. We provide below the key features brought about by the Cyprus tax reform:

• Corporate tax rate: The corporate tax rate has been increased to 15 per cent (previously 12.5 per cent) to align with recent international tax developments (ie Pillar II).
• Tax residency for companies: The new tax reform has removed the following condition from the Cyprus tax residency test for corporations “a company must not be tax resident in another state”. Double tax treaty will take precedence if it provides otherwise.
• Cryptocurrency sector: Profits of any person which occur from cryptocurrency distribution are now taxed at a flat rate of eight per cent.
• Stock options: Stock options granted under approved employer schemes are also subject to an eight per cent flat tax rate.
• Tax residency for individuals (60-day rule): the new tax reform has removed the following condition from the 60-day rule tax residency test “an individual not to be tax resident in another state”.
• Personal income tax: The new tax package has increased the tax-free threshold to €22,000. We provide below a table with the updated personal income tax rates based on annual income.

• New deductions: The new tax package provides new deductions for families, housing, energy-efficient upgrades, and electric vehicle purchases.

• Mandatory filings: Tax resident individuals in Cyprus who are over 25 years old are now obliged to submit an income tax return to the Cyprus tax authorities.
• Liability of directors: Clear liability is established for Directors for their period of tenure, including the legal safeguards demanded by the Cyprus Chamber of Commerce and Industry (CCCI).
• Benefits to employers: Significant deductions to be granted to employers and businesses that provide cost of living allowance (COLA).
• Partnerships: The tax reform has introduced an obligation for partnerships to file tax returns.
• Penalties: Penalties and fines for breaches of the ACT Law have been increased.

• Abolition of the Cyprus legislation on stamp duties: To minimise administrative costs, the new tax package provides the complete abolition of the obsolete Stamp Duty Law of 1963.

• Taxation on dividends: The Special Defence Contribution (SDC) tax rate on actual dividend distributions for Cyprus tax-resident companies and Cyprus tax-resident and domiciled individuals has been reduced to five per cent (previously 17 per cent).
• Abolition of the deemed dividend distribution: Complete abolishment of SDC on deemed dividend distribution for post-2026 profits.
• Rental income: Complete abolition of SDC tax on rental income.
• Interest on bonds: The new package provides a reduced SDC tax rate of three per cent on interest from bonds.
• Penalties: Penalties and fines for breaches of the SDC Law have been increased.

• Tax free threshold: With respect to capital gains tax, the tax-free threshold is increased to €30,000 (previously €20,000) in relation to general land sales, €50,000 (previously €30,000) in relation to sale of agricultural land by farmers and €150,000 (previously €100,000) for the sale of a primary residence.
• Exemption on disposal of listed shares: The exemption on disposal of listed shares has been amended to apply shares listed on a regulated market of a recognised stock exchange (previously only on Cyprus Stock Exchange Emerging Companies Market).
• Definition of shares: The definition of shares that own immovable property, whether directly or indirectly, was amended to include shares that derive at least 20 per cent of their value from immovable property located in Cyprus.
• Penalties: Penalties and fines for breaches of the CGT Law have been increased.

The new tax package is aligned with the Cyprus Recovery and Resilience Plan, marking a pivotal moment in the island’s fiscal policy by providing a more beneficial and efficient tax system for both individuals and companies doing business in Cyprus. It is expected to enhance Cyprus' attractiveness for investment while addressing long-standing issues within the Cyprus tax system.