Cyprus's Parliament approved a significant tax reform package on 22 December 2025, effective from 1 January 2026. The headline change — corporate tax rising from 12.5% to 15% — attracted attention. But the reform also brought meaningful simplifications: the SDC rate on dividends was halved (from 17% to 5% for domiciled residents), and the controversial Deemed Dividend Distribution (DDD) mechanism was abolished.
The 2026 Cyprus tax reform raises corporate tax to 15% but abolishes the DDD (Deemed Dividend Distribution), giving business owners more flexibility to reinvest profits without triggering SDC charges.
Here is a complete analysis of everything that changed and what it means for you.
Complete Change Table: Before vs After
| Subject | Before 2026 | From 1 January 2026 | Impact |
|---|---|---|---|
| Corporate Income Tax | 12.5% | 15% | +2.5% on taxable profits |
| Personal IT threshold | €19,500 | €22,000 | ~€500 less tax for those in €20k–22k range |
| SDC on dividends (domiciled) | 17% | 5% | -12% reduction |
| SDC on dividends (non-dom) | 0% | 0% | Unchanged |
| DDD mechanism | Active (70% over 2 years) | Abolished for 2026+ profits | Major simplification |
| IP Box regime | 80% deduction, 3% effective | Unchanged | No change |
| Non-dom SDC exemption | Full exemption | Full exemption | Unchanged |
| GESY on dividends | 2.65% | 2.65% | Unchanged |
| CGT on securities | 0% | 0% | Unchanged |
| Inheritance tax | 0% | 0% | Unchanged |
| Wealth tax | 0% | 0% | Unchanged |
| Stamp duty scope | Broad | Narrowed to property/banking | Reduction in scope |
| Non-dom duration | 17 years | 17 years + extension option | Marginal improvement |
Change 1: Corporate Tax 12.5% → 15%
What changed: The standard corporation tax rate increased from 12.5% to 15% for all Cyprus-resident companies and Cyprus permanent establishments of foreign companies.
Effective date: Financial years beginning on or after 1 January 2026.
Impact on a typical solopreneur:
| Scenario | 2025 (12.5%) | 2026 (15%) | Difference |
|---|---|---|---|
| Taxable profit: €100,000 | €12,500 | €15,000 | +€2,500 |
| Taxable profit: €200,000 | €25,000 | €30,000 | +€5,000 |
| IP Box (€500k qualifying) | €12,500 | €15,000 | +€2,500 |
With IP Box: The effective rate goes from 12.5% × 20% = 2.5% to 15% × 20% = 3%. A 0.5 percentage point increase on IP income — still an industry-leading low rate.
Provisional tax reminder: If you estimated your 2026 provisional tax using the old 12.5% rate, recalculate and adjust your 31 July 2026 first payment.
Change 2: DDD Abolished for 2026+ Profits
What DDD was: The Deemed Dividend Distribution forced companies to treat 70% of undistributed profits as dividends for SDC purposes after 2 years. This meant domiciled shareholders owed SDC even if they never received a dividend — a tax on retained earnings.
What happened: DDD is abolished for profits earned from 2026 onwards. Companies can now retain profits for reinvestment without triggering deemed dividend SDC charges.
Impact on non-doms: Minimal direct impact — non-doms were always exempt from DDD-related SDC. But it simplifies corporate governance and removes a compliance burden.
Impact on domiciled shareholders: Significant. They no longer face SDC on unrealised profits.
What about pre-2026 DDD obligations? Profits accumulated before 2026 that were subject to DDD under the old rules retain their pre-2026 treatment. Seek specific advice if you have undistributed profits from 2024 or 2025.
Change 3: SDC on Dividends Reduced (Domiciled Only)
What changed: For domiciled Cyprus residents, SDC on dividends fell from 17% to 5%.
For non-doms: No change. SDC remains 0%.
Impact illustration — Domiciled Resident, €100,000 Dividends:
| Before 2026 | After 2026 | Saving | |
|---|---|---|---|
| SDC | €17,000 (17%) | €5,000 (5%) | €12,000 |
| GESY | €2,650 | €2,650 | 0 |
| Total | €19,650 | €7,650 | €12,000 |
This change significantly improves Cyprus's attractiveness for Cypriots and long-term residents who have lost non-dom status.
Change 4: Personal Income Tax Threshold Raised
The tax-free personal income threshold rose from €19,500 to €22,000.
Impact: Individuals earning between €19,500 and €22,000 save approximately €250–500 in income tax.
The tax bands remain the same above €22,000:
| Band | Rate |
|---|---|
| €0 – €22,000 | 0% |
| €22,001 – €28,000 | 20% |
| €28,001 – €36,300 | 25% |
| €36,301 – €60,000 | 30% |
| Over €60,000 | 35% |
What Did NOT Change (Good News for Non-Doms)
For most non-dom entrepreneurs, the relevant news from the 2026 reform is what was left unchanged:
- Non-dom SDC exemption: Still 0% on dividends, interest, and rental income
- IP Box: Still 80% deduction, 3% effective rate
- No CGT on securities/shares: Still 0%
- No inheritance tax: Still 0%
- No wealth tax: Still 0%
- GESY rate: Still 2.65%
- GESY cap: Still €180,000 base (max €4,770/year)
- NID (Notional Interest Deduction): Unchanged
- Loss carryforward: Unchanged
Net Impact Analysis by Taxpayer Type
Type A: Non-Dom Solopreneur, Dividends Only
| Metric | 2025 | 2026 | Change |
|---|---|---|---|
| Corporate tax (€100k profit) | €12,500 | €15,000 | +€2,500 |
| SDC on dividends | €0 | €0 | 0 |
| GESY on dividends | €2,300 | €2,300 | 0 |
| Total | €14,800 | €17,300 | +€2,500 |
Net impact: +€2,500 on €100,000 profit. Manageable.
Type B: Non-Dom SaaS Founder (IP Box, €500k revenue)
| Metric | 2025 | 2026 | Change |
|---|---|---|---|
| Corporate tax (IP Box, effective) | €12,500 (2.5%) | €15,000 (3%) | +€2,500 |
| SDC on dividends | €0 | €0 | 0 |
| GESY (capped) | €4,770 | €4,770 | 0 |
| Total | €17,270 | €19,770 | +€2,500 |
Type C: Domiciled Resident, €100k Dividends
| Metric | 2025 | 2026 | Change |
|---|---|---|---|
| Corporate tax | €12,500 | €15,000 | +€2,500 |
| SDC on dividends (17% → 5%) | €17,000 | €5,000 | -€12,000 |
| GESY | €2,650 | €2,650 | 0 |
| Total | €32,150 | €22,650 | -€9,500 |
Domiciled residents are net winners from the 2026 reform — the SDC cut more than offsets the corporate tax increase.
What to Do Now
- Recalculate provisional tax: Your 31 July 2026 payment must be based on 15% of estimated 2026 profits
- Review DDD position: If you had outstanding DDD obligations on pre-2026 profits, get advice on how these are treated
- Update financial models: All forward projections should use 15% CT, 0% SDC (non-dom), 2.65% GESY
- Check your non-dom application status: If you have not yet applied, the 2026 reform makes it more important than ever
Find ICPAC-registered accountants and tax advisors who can help you navigate the reform at CyprusDesk.
For the full picture of the non-dom regime that remained unchanged in this reform, see the Cyprus Non-Dom guide 2026. For the SDC rate changes in detail, see our SDC tax Cyprus guide.
Disclaimer: This article reflects the author's understanding of the 2026 reform as of March 2026. Tax legislation is subject to further guidance from the Tax Department. Consult a qualified ICPAC-registered professional for advice specific to your situation. Find verified professionals at CyprusDesk.