Cyprus launches major 2026 tax overhaul, raising corporate tax to 15%

Effective 1 January 2026, Cyprus introduced the most extensive fiscal reform since joining the EU. The corporate income tax rate was increased from 12.5 % to 15 % to align with the OECD Pillar Two global minimum tax. While the headline change drew attention, the reform retained key incentives such as the participation exemption on qualifying dividends, the intellectual‑property box regime, the notional interest deduction and the absence of withholding tax on outbound dividends.

The package also abolished the deemed dividend distribution charge, which previously imposed a 17 % special defence contribution on undistributed profits. The special defence contribution on actual dividends was cut from 17 % to 5 % for Cyprus‑tax‑resident individuals, a move intended to stimulate profit distributions. A targeted anti‑avoidance provision introduces a 10 % contribution on concealed dividend distributions. Personal‑tax elements were adjusted as part of the same legislative package.

SPL Audit (Cyprus) Ltd, a Nicosia‑based advisory firm, said: "The 2026 reform is not simply a rate change. It is a structural recalibration of how Cyprus taxes corporate profits, distributes dividends, and enforces compliance." The firm noted that the reforms will require many companies and high‑net‑worth individuals to reassess their structures and compliance obligations.