Cyprus proposed tax changes for 2026 have a distinct feature from governments like the UK. The Cyprus tax plans respect the tax payer and don’t treat them as a money machine to spend on their whims and fancies.
TAX ORGANISATION
International tax law is driven by the Paris based OECD (organisation for economic cooperation) and they are the drivers of exchange of tax information.
International governments are concerned always to keep their tax take close to home but when their resident individuals and business go expat Living and Working Abroad they lose money. OECD allows for double taxation treaties between countries that make sure the right amount of tax is paid by the tax payer – but once.
A tax hungry country like the UK wants individuals to pay up to 45% tax, companies up to 25% , 40% Inheritance Tax on everything including pension funds , 39% Dividend tax , 24% Capital Gains Tax, but can lose tax when working people, business, property investors and the retired choose to relocate overseas.
In recent years the big push by the OECD has been for minimum tax rates, hence the enforced changes being introduced by Cyprus to defend their low tax status for expats Living and Working Abroad.
TAX JURISDICTION
The Cyprus parliament has approved tax action to protect its international standing in the EU and globally to avoid negative consequences to the islands’ tax resident individuals, companies, trusts, investors and property owners.
Ireland and Cyprus have long held a 12.5% corporation tax rate making them attractive locations for international business.
But the OECD want a minimum global tax rate for a country of 15%.
The sanction of the the OECD is to Black List Jurisdictions (BLJ) or class them a Low Tax Jurisdictions (LTJ)
If a country is deemed a BLJ because they don’t charge tax then double taxation treaties fail. Increasingly this is being applied to countries deemed LTJ which is the threat the likes of Cyprus, Malta and Ireland see looming and is enforcing their changes.
If the OECD puts a company on a BLJ then a double taxation treaty doesn’t work and the expats tax goes home.
The minimum corporation tax rate deemed allowable by the OECD is now 15%. Shortly after this rule was introduced, the UK in the Jeremy Hunt budget of Spring 2023 increased the UK corporation tax rate from 19% to 25% and maintained the freeze on personal allowances that ensures the tax creep is maintained to higher and higher tax for all in the UK.
CYPRUS ACT 1
To avoid and protect against OECD challenging Cyrpus tax laws and potentially labelling the island as LTJ or BLJ , the first step has been to introduce these definitions into cyprus tax laws. This means Cyprus tax residents can now not use a LTJ or BLJ for cross border tax planning. By adopting the legislation and practice this allows Cyprus to meet OECD minimum tax rules.
CYPRUS ACT 2
New tax rates and allowances are to be introduced from January 2026, although some may be applied retrospectively into 2025. We will know by the end of this year.
Here’s the highlights of Cyprus Tax change:
- Increased Personal Allowances for individuals.
- increased Tax Rate Bands. Now the top rate of income tax at 35% over €80,000 pa /£70,000
- Retained 50% income tax deduction for first time cyprus employed tax residents
- Decreased Dividend and Saving taxes. Reduced again , this time from 17% to 5%
- Retained – 0% Dividend and Savings taxes for non-doms
- Retained Pension tax rate at 5% remains
- Retained 183 day tax residence rule.
- Reinforced and maintained 60 day tax residence rule
- Retained NO capital gains tax on investment and business assets
- Retained 20% capital gains on cyprus Real Estate Sales to third parties
- Retained no Inheritance tax on death or gift to family or Family Trust
- Retained Health Tax rate 2.65%
- Corporation Tax rises to 15% – the global minimum standard.
- The only tax increase.
CYPRUS IMPACT SUMMARY
Cyprus is protecting its position of strength as an EU country that is low tax for family and business but also internationally OECD tax compliant.
By complying with OECD BLJ & LTJ rules for minimum tax rates it allows expats to relocate to cyprus and be certain of their stable long term financial future.
There are no double standards on taxation.
Whether you are an individual or business an expat can relocate yourself, your business or your investments to Cyprus in the confidence you are in a stable low tax in the long term.
JOIN US
ProACT Partnership assist clients to provide a tax base in Cyprus.
- An individual working remotely.
- A family relocating Living and Working Abroad in Cyprus.
- Those retiring to enjoy pension income at low income tax rates.
- Business wanting an intentional base with minimum corporation taxes for trading or holding.
- Family who want to hold shares, property, business, investment in a secure inheritance tax free holding.
For a Free Consultant Review with ProACT Partnership contact us.
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