From January 1, 2026, Cyprus will implement a wide-ranging tax reform that directly affects property owners and real estate investors. For anyone already active in the Cypriot property market – or considering entering it – the real question is not whether the reform is technical, but how it is felt in practice and what it means for net returns.
The reform introduces changes across several key areas of taxation, reshaping how property investments are structured, taxed, and ultimately monetised. While some elements involve adjustments to existing tax rates, the overall direction of the reform is clear: simplification, lower friction, and greater clarity, particularly for real estate investments.
In practical terms, the new framework makes property investment easier to understand, cheaper to execute, and more predictable over time. This is especially relevant for investors who already own property, as well as for those evaluating the market as a destination for long-term, income-generating real estate investments.
Cyprus Tax Reform – What Changes and Why It Matters for Property Investors
The tax reform coming into force in 2026 introduces a series of targeted changes that directly affect how real estate investments are taxed and managed. Rather than focusing on a single incentive, the reform reshapes several core elements of the tax system that investors interact with throughout the entire investment lifecycle – from acquisition, through rental income, and ultimately to profit distribution or sale.
These changes are particularly relevant because they touch on areas that have a direct and measurable impact on net returns. Corporate taxation, transaction costs, dividend taxation, income tax thresholds, and capital gains exemptions are all adjusted under the new framework.
What makes this reform significant is not just the individual changes, but the overall direction. The updated tax structure aims to reduce complexity, remove unnecessary transactional costs, and provide clearer rules for property ownership and income generation.
Corporate Income Tax Increase – From 12.5% to 15%
As part of the 2026 reform, the corporate income tax rate will increase from 12.5% to 15%. This change applies to investors who hold real estate assets through corporate structures and pay tax on profits at the company level.
At first glance, this increase may appear negative. In practical terms, however, the impact is relatively limited. On an annual profit of €20,000, the higher rate results in approximately €500 in additional tax.
Crucially, this adjustment should not be assessed in isolation. Other elements of the reform – particularly those affecting transaction costs and dividend taxation – significantly offset this increase.
Complete Abolition of Stamp Duty
One of the most tangible and immediately felt changes introduced by the reform is the complete abolition of stamp duty. Until now, stamp duty applied to most real estate transactions and formed part of standard acquisition costs.
With stamp duty removed entirely, investors no longer incur this tax at the point of purchase. On a property acquisition priced at €250,000, this typically translates into a saving of around €500 from day one.
Beyond the direct financial benefit, the removal of stamp duty simplifies the transaction process itself.
Dividend Tax Reduction – From 17% to 5%
One of the most significant elements of the reform is the sharp reduction in the tax applied to dividend distributions. Under the new framework, the tax on dividends is reduced from 17% to just 5%.
In Cyprus, this reduction is implemented through the Special Defence Contribution (SDC) system, and the practical outcome depends on the investor’s individual tax profile.
Previously, a €50,000 dividend distribution could result in €8,500 in tax. Under the new framework, the same distribution may be taxed at €2,500, leaving a significantly larger portion of profits in the investor’s hands.
Increase in the Personal Income Tax Allowance
As part of the reform, the personal income tax allowance increases from €19,500 to €22,000. This change is particularly relevant for individual investors who own property in their personal name and generate rental income.
By raising the tax-free threshold, up to an additional €2,500 per year can be earned without triggering income tax. If rental income is split between two owners, each may apply their personal allowance.
Increase in the Capital Gains Tax Exemption
Another major improvement introduced by the reform is the increase in the capital gains tax exemption threshold from €17,000 to €30,000. Capital gains tax is set at 20% and applies only to net profit after eligible expenses are deducted.
By increasing the exemption base, tax is calculated on a smaller portion of the gain. Depending on the transaction, this can translate into several thousand euros retained by the investor.
Housing, Rental and Mortgage-Related Incentives
In addition to direct tax changes, the reform introduces housing-related incentives aimed at easing the cost of living and supporting households.
Although these incentives are not targeted at investors directly, their impact on the market is meaningful, strengthening demand for long-term rentals and supporting stability.
For property investors, this contributes to a healthier rental market with more predictable long-term demand.
Bottom Line for Property Investors
Taken as a whole, the 2026 reform reshapes the investment landscape in a way that is largely favourable for property investors. While some headline tax rates increase, the combined effect often results in lower effective taxation in practice.
International Context – Why Cyprus Stands Out in 2026
Greece – Tighter Enforcement and Fewer Incentives
As of 2026, Greece focuses on stronger tax enforcement and increased scrutiny, creating a more restrictive environment for property investors.
Spain – Clear Regulatory Tightening for Property Investors
Spain continues along a path of regulatory tightening, with higher taxation and stricter short-term rental rules, particularly in cities such as Barcelona, Madrid, and Valencia.
Portugal – Following the Same Direction
Portugal follows a broadly similar direction to Greece and Spain, with tighter regulation and fewer incentives, although local application can vary.
Final Comparative Conclusion
Against a backdrop of tightening regulation across Southern Europe, Cyprus stands out as a clear exception. The 2026 reform simplifies taxation, lowers friction, and improves after-tax outcomes for property investors.
FAQ - Frequently Asked Questions
What is changing under the Cyprus tax reform in 2026?
From January 1, 2026, Cyprus introduces a tax reform affecting corporate tax, dividends, transaction costs, income tax thresholds, and capital gains exemptions.
Does the Cyprus tax reform increase or decrease taxes for property investors?
While some rates increase, the overall effect often results in lower effective taxation.
Is stamp duty abolished on property purchases in Cyprus?
Yes. Stamp duty is fully abolished from 2026 onward.
How are dividends taxed in Cyprus after the reform?
Dividend taxation is reduced from 17% to 5% under the SDC framework, depending on tax status.
Is the Cyprus tax reform suitable for long-term investors?
Yes. The reform improves clarity, predictability, and after-tax outcomes for long-term property investors.
Visit Our Showroom in Geroskipou
Thinking About Buying Property in Cyprus After the 2026 Tax Reform?
The Cyprus tax reform coming into effect in 2026 brings greater clarity to property ownership and long-term investment planning. When purchasing property in Cyprus, understanding how tax rules apply to new developments is an important part of making informed decisions.
Luma Developers is a property developer based in Paphos, offering residential developments designed for long-term ownership under the updated tax framework.
Our team in Geroskipou can assist buyers with:
🔹 Purchasing property directly from the developer
🔹 Information related to property ownership under the 2026 tax framework
🔹 Support throughout the buying process for new developments
📍 Visit us: Pellapaisiou Street 12, Paphos 8049, Cyprus
📞 Call us: +357 97 731133
✉️ Email: [email protected]
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📝 Or use our contact form
If you’re considering buying property in Cyprus in light of the 2026 tax reform, Luma Developers can support you throughout the purchase of a new home.
