Understanding the Proposed 2025 Cyprus Tax Reform: Key Changes & Implications

In February 2025, the President of Cyprus, Mr. Nikos Christodoulides, announced a wide-reaching package of proposed tax reforms which are intended to align Cyprus with international best practices while maintaining its reputation as a competitive jurisdiction for business, investment, and relocation.

The proposed tax reforms must go through a legislative process, which includes receiving approval from the Cyprus Parliament, before any amendments are finalized. Therefore, it is important to keep in mind that the details provided below might not be part of the final tax reform or could be modified before becoming law. Implementation is expected to follow by late 2025 or early 2026, depending on final legislative approval. It is possible that a number of tax measures will have retroactive effect as from tax year 2025, although it is likely most measures will come into effect in tax year 2026. 

Summary of Proposed Tax Changes & Key Items Remaining Unchanged

Context: Why This Reform Matters

The proposed changes reflect Cyprus’ continued commitment to:

• Aligning with OECD BEPS 2.0 global tax standards, particularly the global minimum tax
• Attracting high-value individuals, entrepreneurs, and fund managers
• Ensuring stability and predictability in the legal and tax framework

This makes Cyprus one of the few EU jurisdictions to strike a clear balance between reform and competitiveness.

Corporate Tax Changes – Still an Advantage

The proposed increase of CIT to 15% brings Cyprus into alignment with the OECD’s Pillar 2 minimum tax framework. However, even at 15%, Cyprus remains significantly more attractive than many Western European jurisdictions, especially when considering:

• No withholding tax on dividends to non-residents
• No capital gains tax on securities
• Low effective tax rates through legal incentives

Offsetting incentives Include:

• New tax credits for green investments and ESG-aligned projects
• Enhanced R&D deductions to support tech, innovation, and IP development
• Extended loss carry-forward period (from 5 to 10 years), improving group tax planning

These measures are designed to neutralise the impact of the CIT increase for strategic and innovation-focused companies.

Dividend Taxation: Simplified and Streamlined

Cyprus proposes a reduction of SDC from 17% to 5% on actual dividends paid to Cyprus tax residents. In addition, the complete abolition of the DDD regime will reduce administrative and planning burdens. This will particularly benefit:

• Cyprus holding companies with domestic shareholders
• Family offices using Cyprus vehicles for long-term planning
• Investors retaining profits for reinvestment rather than forced distribution
  
  

Personal Tax Updates: Favourable for Skilled Professionals

The personal income tax (PIT) updates are designed to reward skilled professionals and attract talent:

• Tax-free threshold rises to €20,500, offering moderate relief to employees and entrepreneurs
• The top 35% rate now applies only to income above €80,000 (previously €60,000)
• The 50% income tax exemption for new residents earning €55,000+ per year remains unchanged

These changes support business relocation and long-term residence by executives and skilled professionals.

Residency, Relocation & International Mobility

While the tax reform does not directly affect the Cyprus Permanent Residency Programme, related reforms support relocation more broadly:

• A new Entrepreneur Visa scheme is replacing the startup visa
• The Digital Nomad Visa will offer longer stay durations and more flexible conditions
• Non-domicile tax regime remains intact, with discussions around optional extension beyond 17 years for an annual fee

Cyprus remains one of the most attractive destinations in the EU for HNWIs and international professionals.

Impact on Investment Funds, Cross-Border Structures & Private Wealth

• No changes to capital gains tax (same but modernised for immovable property + remains 0% on securities)
• No withholding tax on dividends for non-residents
• No subscription tax on fund assets
• No changes to the AIF, RAIF, or UCITS fund regimes
• Abolition of DDD will make repatriation and reinvestment even smoother

Additionally, the NID and IP Box Regime remain key tools for efficient structuring.

Conclusion

The 2025 tax reform proposals mark a significant step in Cyprus’ efforts to modernise its tax system while preserving its competitive edge for international business, investment, and private wealth planning. With a balanced mix of alignment to global standards and targeted incentives, Cyprus remains a compelling jurisdiction for structuring and growth.

As the legislative process unfolds, timely review and proactive planning will be essential to ensure continued compliance and optimisation. We recommend that businesses, fund managers, and private clients closely monitor ongoing developments and seek personalised advice before making decisions based on the proposed measures.

How ATG Can Help

At ATG, we support international businesses, entrepreneurs, investment funds, and HNWIs in navigating complex regulatory changes across jurisdictions. Our team monitors tax and legal reforms closely to ensure that our clients can structure, adapt, and remain compliant while optimising their position. Whether you are considering fund formation, corporate relocation, or private wealth planning in Cyprus, our specialists can help you assess how these proposed reforms may impact your structure and guide you through necessary adjustments.

Additional Resources

For additional resources and publications on this subject, please consult:

• Cyprus Tax Department - Official Portal
  Access official tax legislation, forms & guidelines.
  
  
• Ministry of Finance - Announcements
  Stay informed with the latest press releases and financial updates.
  
  
• Invest Cyprus (CIPA) - Business Environment 
  Explore investment opportunities and business incentives in Cyprus.
  
  

Contact Us

This publication should be used as a source of general information only. It is not intended to give a definitive statement of the law. For a FREE Initial Consultation to discuss the specifics of your enquiry please contact Andreas Athinodorou on + 357 22 057 570 / +357 22 057 560 or andreas.athinodorou@atgfunds.com / andreas.athinodorou@atgcorporate.com.