Cyprus 2026 Tax Update: Good News for Expats, Entrepreneurs & Businesses
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If you are an expat living in Cyprus, or considering a move there, the landscape has shifted… and fortunately, not for the worse. With the 2026 budget passed into law on December 22, 2025, new opportunities have emerged for protecting assets, minimising tax liabilities, and managing cross-border business.
Whether you are a retiree, a digital nomad, or a business owner, here is a breakdown of what the 2026 changes mean for you and why Cyprus remains a premier tax jurisdiction.
1. Major Compliance Change: Mandatory Tax Returns
The most immediate change for 2026 is a move toward total transparency. In the past, filing requirements could be a grey area for some. That is no longer the case.
Universal Filing: Every tax resident aged 25 or older must file a tax return in 2026.
Property Owners: If you own property in Cyprus, even if you only rent it out occasionally via platforms like Airbnb, you are obligated to register for a tax number and file a return.
The Takeaway: Ignorance is no longer an excuse. Authorities are digitising and updating processes, so ensure your paperwork is in order by early 2026.
2. Personal Income Tax: Higher Allowances
While other nations, such as the UK, have frozen personal allowances, Cyprus has increased them, making it attractive for income earners.
Tax-Free Threshold
Individuals can now earn €22,000 before paying any income tax.
Tax Rates
| Taxable Income (€) | Tax Rate |
|---|---|
| 0 – 22,000 | 0% |
| 22,001 – 32,000 | 20% |
| 32,001 – 42,000 | 25% |
| 42,001 – 72,000 | 30% |
| 72,000 and over | 35% |
Dividend & Interest Advantage
The 2026 tax reform has significantly improved the landscape for investment income:
For Expats (Non-Doms): If you are a non-domiciled tax resident (generally meaning you haven't been a tax resident for 17 out of the last 20 years), you continue to pay 0% tax on dividends and bank interest.
For Long-Term Residents: If you eventually become domiciled, the Defence Tax on dividends has been slashed from 17% to just 5%.
No More Forced Withdrawals: The "Deemed Dividend Distribution" (DDD) rules have been abolished, meaning you are no longer forced to distribute profits every two years. You now have full control over when you take dividends.
3. The 60-Day Rule for Digital Nomads
Cyprus offers one of the most flexible residency rules in Europe, perfect for those with a mobile lifestyle.
You can become a Cyprus tax resident by spending just 60 days in the country per year. This allows you to:
Spend the remaining 10 months traveling or working in other jurisdictions (e.g., 3 months in Spain, 3 in Dubai, 3 in Singapore).
Maintain a tax base in Cyprus to benefit from the 0% dividend tax and low income tax rates.
Avoid being caught in the tax nets of high-tax jurisdictions, provided you manage your time carefully.
4. Corporate Tax and Business Incentives
For entrepreneurs, setting up a Personal Service Company (PSC) or a holding company in Cyprus offers distinct advantages.
Low Corporate Tax
The maximum corporation tax rate is 15%. This applies to profits after you have deducted legitimate business expenses, including travel and living costs associated with the business.
New Disposal Relief (2026)
A significant new benefit introduced for 2026 is the business disposal relief. If you sell a business or shares in a business, you can receive up to €200,000 of that income tax-free.
Management Requirement
To benefit from these rates, the management and control of the company must physically be in Cyprus.
5. Strategic Asset Protection (UK Expats)
For UK nationals, Cyprus serves as an excellent shelter for capital gains.
Zero Capital Gains: Cyprus charges no Capital Gains Tax (CGT) on the disposal of assets (shares, property, etc.) located outside of Cyprus.
The 5-Year Strategy: If you hold a UK property portfolio with a high potential CGT liability (up to 24% in the UK), you can sell those assets while a Cyprus tax resident. If you remain non-resident in the UK for five full years, you can legally avoid the UK capital gains liability entirely.
Inheritance Tax: There is no inheritance tax in Cyprus. By utilizing family trusts and Cyprus wills, you can pass wealth down to the next generation without the heavy tax burdens found in other countries.
6. Living and Working: The Visa Reality
While the tax benefits are immense, the practicalities of moving require planning, especially for non-EU citizens (including Brits).
Work Permits: Non-EU citizens do not have an automatic right to work in Cyprus. You cannot simply arrive and take a local job.
The Solution: You generally need to be self-employed with your own company or work remotely for an overseas employer. By structuring your income through a Cyprus entity or demonstrating overseas income, you can secure residency without taking a local job.
| Tax Type | Rate / Rule (2026 Update) |
|---|---|
| Personal Allowance | €22,000 (Tax-Free) |
| Top Income Tax Rate | 35% (on earnings over €72,000) |
| Dividend Tax |
0% (Non-Domiciled / Expats) 5% (Domiciled Residents) |
| Capital Gains Tax | 0% (on non-Cyprus assets) |
| Inheritance Tax | 0% |
| Corporate Tax | 15% (Standard Rate) |
| Business Disposal Relief | First €200,000 Tax-Free (New for 2026) |
| Residency Requirement | Minimum 60 days per year |
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