The Cypriot parliament has finally approved a major tax reform, the first systemic change to the country's tax regime in 23 years.
The key element of the reform is an increase in the corporate tax rate (CIT) from 12.5% to 15%, effective January 1, 2026.
We have previously analyzed the general parameters of the reform and its impact on investors in Cyprus approves tax reform: what will change for business and investors from 2026.
Next, let's focus on the specific provisions of the reform that have come into force and their practical implications for businesses abroad.
Corporate tax in Cyprus from 2026
From January 1, 2026, all companies - both Cypriot and foreign companies operating through Cypriot structures - will pay a flat 15% corporate tax rate. This decision is in line with the OECD and EU requirements for global minimum taxation.
Despite the formal increase in the rate, Cyprus remains competitive due to the parallel reduction of the tax burden on business owners.
Dividends, rents and offsetting tax changes
The reform includes a number of important changes that significantly affect the effective tax rate:
Cancellation of the deemed dividend distribution (DDD) rule for profits after 2026;
Reduction of the special defense contribution (SDC) on actual dividends paid from 17% to 5%;
Complete elimination of the SDC on rental income.
Such changes make Cyprus companies particularly attractive for holding, investment and international corporate structures.
Tax incentives for business and innovation
As part of the tax reform, Cyprus is also expanding incentives for business development:
Tax loss carryforwards allowed for 7 years instead of 5;
Limit on allowable business expenses for hospitality purposes increased to €30,000;
120% tax deduction for R&D and intangible;D and intangible assets has been extended until 2030;
Profits from crypto assets are taxed at a flat rate of 8%;
Stock options under approved employer programs are also taxed at 8%.
These provisions create a favorable environment for IT businesses, startups, fintech and crypto projects.
Strengthening tax control and compliance
The reform also significantly strengthens tax administration:
Mandatory filing of declarations for all persons over the age of 25;
Ban on cash payments for rent over €500;
The right of tax authorities to request 6 years of financial documents;
The possibility of freezing companies and shares in case of significant tax arrears.
At the same time, taxpayers retain the right to appeal against decisions of the tax authorities in court.
Company registration in Cyprus after the reform
Taking into account the new rules, company registration in Cyprus remains a relevant solution for international businesses looking for a combination of tax transparency, European jurisdiction and a stable legal environment.
Despite the increase in the corporate tax rate to 15%, Cyprus does not lose its attractiveness, but rather forms a unique model for legal international business.
According to the company's partner Iryna Kucheriava, the combination of 15% corporate tax (CIT) and mandatory financial audit makes Cypriot companies among the few in the EU that meet the criteria of effective taxation for the purposes of CFC reporting.
In 2026, Cyprus will actually become a unique jurisdiction that combines:
Global minimum tax of 15%;
Mandatory audit;
Transparent EU system;
Favorable conditions for holdings, IT and investment structures.
For tax residents of Ukraine, this means that a Cyprus company can be considered as a fully taxed company, which significantly reduces the risks of additional tax charges within the framework of the rules of controlled foreign companies - provided the structure and compliance are correct.
