Tax Reform in Cyprus 2025: What Will Change for Businesses and Residents?

On February 26, 2025, President Nikos Christodoulides announced a series of proposed tax reforms that could impact entrepreneurs and individuals in Cyprus. However, it is important to note that these changes have not yet been passed into law and are subject to further review, consultations, and potential amendments. The reforms are expected to take effect in 2026, pending final approval by the parliament.

Key Changes in Cyprus’s Tax System

• Increase in Personal Tax-Free Income Threshold

One of the most anticipated changes is the increase in the tax-free income threshold, which will now be set at €20,500 (up from the current €19,500). This measure is aimed at supporting the middle class and reducing the tax burden on families.
Initially, there were discussions about raising the threshold to €24,500, but the authorities ultimately opted for a more balanced approach.

Proposed Adjustments to the Tax Brackets:

Previously, the maximum rate of 35% applied to incomes starting from €60,001. Now, this threshold has been raised to €80,000, making the tax system more favorable for high-income earners.

Families with a combined annual income of up to €80,000, where both spouses are employed, will be able to benefit from additional tax deductions.

• Increase in Corporate Tax for Companies

The proposed reform includes an increase in corporate tax from 12.5% to 15%. This adjustment is aimed at aligning Cyprus’s tax system with international tax trends and EU recommendations. However, even with this increase, Cyprus still maintains one of the lowest corporate tax rates in Europe. For comparison: corporate tax in Portugal is 21%, in Greece – 22%, and in Spain and France – 25%.

• Capital Gains Tax

Under the proposed reform, the capital gains tax will maintain its core principle and will continue to apply exclusively to real estate located within Cyprus. A modernization of the tax system is planned, aimed at optimizing the calculation procedure, improving reporting, and closing legislative loopholes.

• New Rules for Tax Residency

For Cyprus tax residents (individuals), the 183-day rule remains in place, along with the enhanced 60-day tax residency provision. One of the key changes will be the expansion of the tax residency definition to include the “centre of business interests” in Cyprus, even if the taxpayer’s physical presence on the island is minimal. This change is based on the so-called “French model.”

Adjustment of the Non-Dom Regime

The Non-Dom (non-domiciled) tax regime in Cyprus will remain; however, an annual fee is planned to maintain this status. This adjustment may impact foreign investors and expats who benefit from the tax advantages of this regime.

Strategic Goals of the Reform

President Nikos Christodoulides emphasized that the aim of the reform is to attract investments, strengthen tax stability, and enhance Cyprus’s international competitiveness.

“The goal remains investment in innovation, quality, and reliability so that Cyprus becomes a magnet for high-quality investments and, of course, a pillar of security and stability in the wider Eastern Mediterranean region,” stated the President.

Minister of Finance Makis Keravnos also highlighted that the government aims to secure parliamentary approval for the reforms by the end of 2025, allowing them to take effect from 2026.

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