The 2026 tax reform. A clear guide for those investing in Cyprus

If you thought taxes in Cyprus were a matter of ‘pay once at purchase and forget it’, January 2026 has news for you. Parliament voted through a package of laws that turned Cyprus from an old-style tax haven into a modern, transparent, but still very advantageous jurisdiction.

I have gone through hundreds of pages of fresh reports (KPMG, Deloitte, PwC) and picked out what will genuinely change your cash flow. Point by point.

1. The end of the cash era in rentals

This is probably the loudest change. Rent in Cyprus may now be paid electronically only (bank transfer, card and so on). Cash payments are officially outlawed.

What this means for you: if you let out an apartment, every cent must be visible to the bank. The Tax Department has been given the power to suspend a business if returns are not filed on time or if grey schemes are detected.

The upside: the market is going white. That squeezes out unscrupulous competitors and raises the general level of rental rates.

2. Corporate tax of 15% and new limits

For those who hold property through Cypriot companies (LTD): the headline corporate income tax rate has risen from 12.5% to 15%.

The nuance: a ‘super-deduction’ for R&D has been introduced — a 20% deduction until 2030 — but for residential property owners something else matters more: penalties for late returns have gone up. The TD7 deadline (employer’s return) is now strictly 31 March.

Advice: recalculate your net yield. That 2.5% difference has to be offset either by rent growth or by optimising running costs.

3. A gift for individuals: the €22,000 tax band

The state has decided to support those who live and work on the island. The tax-free band of annual personal income has been raised from €19,500 to €22,000.

Why this matters: it increases the purchasing power of local residents. And as we have said in previous posts, local demand is your main buyer when you exit an investment in 5–7 years.

4. A revolution in capital gains tax (tax on profit from a sale)

Here there is excellent news for long-term investors. The amounts of gain exempt from tax on a sale have risen significantly:

• Main residence: the first €150,000 of gain is now exempt (previously €85,430), provided you have owned it for more than 5 years.
• Agricultural land: the threshold has risen to €50,000.

Cyprus is encouraging ‘long’ investment. Speculatively reselling an apartment after a year is now less profitable than holding it for 5+ years.

5. VAT and the rental offset

Many people forget that when buying a new-build in order to let it out you pay 19% VAT. If you plan short-term rental (Airbnb), you are obliged to collect 9% VAT from tenants.

That 19% input VAT does not simply have to be written off. It can be capitalised on the balance sheet and gradually offset against the output VAT (9%) that you owe to the budget. That way you recover the VAT you paid at purchase. The right to reclaim VAT remains available for 6 years.

6. Non-Dom status and 5% dividends

For domiciled residents (Cypriots) the defence contribution (SDC) on dividends has been cut to 5% (it was 17%).

For foreign investors with Non-Dom status the rate stays at 0%. This is still the best instrument in Europe for those who live off investment income. I will also remind you that Cyprus has a 60-day rule for obtaining tax residency. Lately we have been seeing heightened interest in Non-Dom status from clients in the UK and in some EU countries.

The True Square takeaway

The Cypriot tax system in 2026 has become more complex, but fairer. It is no longer enough simply to ‘buy an apartment’. You need to choose the right ownership structure (individual vs company) and keep an eye on the technical condition of the asset (remember Class A?) in order to minimise tax on exit.

My advice: if you are planning a deal this year, do not listen to ‘chat group advice’ vintage 2023.