Date: January 17, 2026 Category: Market Insights / Legal & Tax
At DiacoEstates, we have always championed Cyprus not just as a beautiful place to live, but as a resilient and strategic hub for investment. As we move deeper into 2026, the landscape is shifting once again—this time through a massive modernization of the Cypriot tax framework.
For real estate investors, business owners, and landlords, these changes are more than just bureaucratic updates; they represent a significant streamlining of costs and a "maturing" of the market. Here is what you need to know about the business taxation changes and how they impact your property portfolio.
1. The End of Stamp Duty: Lower Upfront Costs
One of the most headline-grabbing changes for property buyers is the complete abolition of Stamp Duty for most transactions.
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The Change: Previously, stamp duty was a tiered cost added to contracts, often creating friction in sales. As of January 1, 2026, this has been eliminated for real estate contracts.
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The Impact: This reduces the upfront "sunk costs" of acquiring property. Whether you are buying a holiday villa in Protaras or a commercial space in Limassol, your initial capital outlay is now lower, improving immediate ROI.
2. Rental Income: Simplified and SDC-Free
For our clients with buy-to-let portfolios, the tax treatment of rental income has arguably just become much simpler.
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The Change: The Special Defence Contribution (SDC)—which was previously levied at effectively 2.25% (3% on 75% of rent)—has been abolished for rental income.
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The Impact: Landlords no longer need to worry about this separate levy. While rental income is still subject to standard Personal Income Tax (and General Healthcare System contributions), the removal of SDC streamlines compliance and removes a layer of taxation that affected tax residents.
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Note: To improve transparency, mandatory electronic payment methods are being introduced for rents exceeding €500/month starting July 2026.
3. Capital Gains Tax (CGT): Higher Thresholds for Sellers
If you are considering selling a property to upgrade or liquidate an asset, the government has adjusted exemptions to match the reality of today's property prices.
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Primary Residence: The lifetime exemption for profit on the sale of a primary residence has nearly doubled, rising from €85,430 to €150,000.
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Land-for-Property (Antiparochi): A vital update for developers and landowners—transactions where land is exchanged for building units are now fully exempt from CGT, provided construction is completed within five years.
4. Corporate Changes: A Competitive Trade-Off
For those holding property through corporate structures or running businesses in Cyprus, the corporate tax landscape has shifted to align with global standards while offering relief on dividends.
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Corporate Tax Rate: Increased from 12.5% to 15%. While this is a slight hike, Cyprus remains one of the most competitive jurisdictions in the EU.
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Deemed Dividend Distribution (DDD) Abolished: This is a game-changer. The complex rule that forced companies to distribute 70% of their profits (or pay tax on them "deemed" distributed) is gone for post-2026 profits. This gives business owners massive flexibility to reinvest profits without tax penalties.
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Dividend Tax Cut: The SDC on actual dividends received by Cyprus tax residents has been slashed from 17% to 5%.
5. The "Property-Rich" Company Trap
A word of caution for those holding real estate via shares: The definition of a "property-rich" company has tightened. Previously, Capital Gains Tax on share disposals only applied if 50% of the company's value came from real estate. That threshold has now been lowered to 20%. If you are selling shares in a company that holds property, it is now much more likely to trigger a CGT event.
The Verdict for 2026
The 2026 tax reform is a "give and take" package, but for the real estate sector, the "gives" are substantial. The abolition of stamp duty and the simplification of rental taxes make the market more liquid and accessible.
At DiacoEstates, we are ready to help you navigate these changes. Whether you are looking to capitalize on lower acquisition costs or restructure your portfolio to maximize the new dividend rules, our team is here to guide you.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Always consult with a qualified tax advisor regarding your specific situation.