Cyprus tax reform 2026: what changed for your books.

01What changed, at a glance

Eight changes worth tracking, most effective from 1 January 2026:

02The corporate tax rate: 12.5% to 15%

The headline change is the corporate income tax rate, up from 12.5% to 15%, effective for accounting periods from 1 January 2026. For a practice, the rate itself is the easy part to update; the places it quietly touches are not:

• Tax provisions. Year-end and interim provisioning models need the new rate keyed in, not just for 2026 profits but for any true-up of a prior estimate carried into this year.
• Deferred tax. Deferred tax assets and liabilities are measured at the rate expected to apply when the timing difference reverses. A rate change is exactly the trigger that should send a client's deferred tax working paper back for a re-check, not a roll-forward.
• Payments on account. Provisional tax estimates for 2026 should be rebuilt on 15%, not carried over from a 12.5% assumption.

03Dividends: the SDC cut and the end of deemed distribution

Two changes land on dividends together. Special Defence Contribution (SDC) on dividends drops from 17% to 5%, which changes the arithmetic of any shareholder-remuneration planning built around the old rate. And deemed dividend distribution (DDD) is abolished: Cyprus companies no longer face a deemed distribution, and the associated deemed SDC, on undistributed accounting profits after the old two-year clock ran out.

For a practice, DDD's abolition is the more operational change. If a deemed-distribution tracking file existed, the two-year monitoring clock and the year-end deemed-SDC projection, it can be retired for periods going forward. Keep the historical files: prior years' deemed distributions, and any SDC already paid or accrued under the old rule, are not retroactively undone.

04Losses, R&D, and the new crypto tax

Loss carry-forward is extended from 5 to 7 years. Any schedule tracking losses that were due to expire under the old 5-year window is worth revisiting: some losses that looked lost may now survive longer, which can also affect whether a deferred tax asset for those losses should be recognised.

The R&D super-deduction, 120% of qualifying expenditure, continues through 2030. For clients running qualifying research and development, the deduction is only as good as the evidence behind it: keep R&D costs coded distinctly in the ledger rather than folded into general operating expenses, so the deduction is defensible at year-end.

Crypto-asset gains now carry a dedicated 8% tax, new territory for most practices. It means a new calculation line for any client holding or trading crypto-assets, and it makes acquisition cost and disposal proceeds a tax record, not just a management-accounts nicety. Open a record for it now rather than reconstructing history at filing time.

05Stamp duty and the TFA income-tax timeline

Stamp duty on property contracts is abolished for contracts from 1 January 2026. For property transactions closing this year, that is one line that no longer needs to be accrued for or chased as a completion cost; contracts predating the change still followed the old rule.

The TFA (Tax For All) portal's income-tax module has not launched yet; its rollout has moved to 2027. VAT, VIES, and PAYE are already live on TFA and unaffected by this. Income tax filing continues on the existing process in the meantime, so there is no workflow to change yet on that front, only a date to watch for 2027.

06A checklist for this quarter

Five things worth doing across the client book before the next filing cycle:

1. Rebuild tax provisioning models at 15%, including any deferred tax balances that need re-measuring against the new rate.
2. Retire deemed-distribution tracking for 2026 onward, while keeping the historical files for prior years untouched.
3. Re-check any expiring-loss schedule against the new 7-year carry-forward window before writing a loss off as lost.
4. Ask clients about crypto-asset activity and open a record for acquisition cost and disposal proceeds if you have not already.
5. Confirm the income-tax filing workflow client by client, since TFA income tax is not live yet, there is nothing to migrate on that front today.