Crypto in Cyprus: How the New 8% Flat Tax – introduced by the Cyprus Tax Reform – Makes Cyprus a Global Hub for Founders & Investors
As part of the Cyprus Tax Reform, Cyprus has now enacted a dedicated crypto taxation rule under its Income Tax legislation. The reform introduces a flat 8% tax on gains from the disposal of crypto-assets, effective from 1 January 2026.
For crypto founders, investors, and Web3 operators, the key value is clarity: the law defines what a “crypto-asset” is, what counts as a taxable “disposal,” and how losses are treated — directly in statute.
Crypto tax in Cyprus: key points
- Effective date: 1 January 2026 (Cyprus Tax Reform – Income Tax amending law is published and effective from this date, subject to specific exceptions).
- Crypto disposal gains tax rate: 8%.
- “Crypto-assets” definition: aligned to MiCA (EU Regulation (EU) 2023/1114, Article 3(1)(5)).
- “Disposal” includes: sale, gift/donation, exchange crypto-to-crypto, and using crypto as a means of payment.
- Losses from crypto disposals: can be offset only against crypto disposal gains in the same tax year; not carried forward and not surrendered as group relief under article 13 mechanisms.
- Mining carve-out: the special disposal rule does not apply where the crypto was acquired through mining activity. Such activity we understand will be taxed under normal taxation rules.
- Other crypto-related profits not covered by the disposal rule are taxed under the general Income Tax rules (Parts III and V).
What is taxed: gains from “disposal of crypto-assets”
The new Income Tax provision (Article 20E) taxes “gains of any person arising from the disposal of crypto-assets” at a rate of 8%.
Crucially, the law does not leave “disposal” to interpretation. It explicitly treats the following as disposals:
- selling crypto-assets
- gifting/donating crypto-assets
- exchanging one crypto-asset for another crypto-asset
- using a crypto-asset as a means of payment
This definition is practical for founders because it reflects how crypto is used in real life: not only “cash-out” sales, but also swaps and payments.
Losses: ring-fenced and limited to the same tax year
The law is straightforward on losses from crypto disposals:
- losses can be offset only against gains from crypto disposals arising in the same tax year, and
- they are not carried forward or offset against future-year profit of the same person, and
- they are not surrendered to another company under the group relief mechanisms referenced in article 13.
Practical takeaway: if you trade actively or manage treasury positions, good tracking and timing becomes important — particularly around year-end.
Mining: special carve-out
The disposal article explicitly does not apply where the crypto being disposed of was acquired through mining activity.
In other words: the “8% on disposal gains” rule is not automatically the answer for mining-based acquisition. Mining-related tax treatment needs to be assessed under the appropriate general provisions.
What about staking, yield, airdrops, and other crypto income?
The law also states that any gain from crypto transactions that does not fall within the disposal article is taxed under the general Income Tax rules (Parts III and V).
That matters for founders because many crypto businesses have multiple streams: token sales, staking rewards, protocol fees, service revenue, employment/bonus tokens, or treasury activity. The correct treatment depends on what the activity is, how it’s documented, and who earns it (individual vs company).
Why this is attractive for crypto founders and businesses
Cyprus is not just offering a rate. It is offering legislative certainty:
- a legislated taxable event (disposal) with a clear definition
- a fixed rate on that category of gains (8%)
- a loss rule you can model in advance (ring-fenced, same-year)
- a definition of crypto-assets anchored in MiCA (EU 2023/1114)
For teams planning a serious EU base (founders + ops + banking + reporting + due diligence), clarity is often as valuable as the headline number.
Cyprus as an Attractive Destination for Crypto Businesses
Cyprus is already well-positioned as a strategic base for tech and digital asset enterprises:
- EU Membership & Regulatory Certainty
Operating within the EU provides access to European markets, regulatory harmonisation, and legal stability — critical factors for crypto businesses targeting institutional adoption.
- Competitive Tax Environment Beyond Crypto
While corporate tax will rise to 15% from 2026 — the crypto tax regime remains a distinct and favourable regime for digital assets.
- Business-Friendly Infrastructure
Cyprus offers established services for company formation, substance solutions, IFRS-aligned crypto accounting, and audit compliance — enabling seamless operations and investor confidence.
- IP Box Regime
If your Cyprus Company is in the space of developing an IP, then it may be in a position to take advantage of the IP Box Regime. Under the IP Box, up to 80% of qualifying profits from qualifying intangible assets can be exempt from CIT, reducing the effective tax rate of your Crypto Company even further.
- Lifestyle & Residency Perks
Beyond tax rules, quality of life, strategic geographic location between Europe, the Middle East, and Africa, and visa/residency programs make Cyprus attractive for founders and teams relocating or establishing headquarters.
How crypto clients can benefit
Here are practical, compliance-first ways crypto clients can benefit from Cyprus’ new framework:
- Lock in clarity for 2026 disposals: Because the 8% applies from 1 January 2026 and “disposal” is defined broadly (sale, swap, payment, gift), clients can plan how and when disposals happen and avoid accidental taxable events through poor tracking.
- Design a clean “disposal audit trail”: Implement wallet/exchange mapping, ownership documentation, timestamps, and pricing methodology. This is especially important because swaps and payments are disposals, not just cash-outs.
- Separate operating revenue vs. treasury activity: Many crypto businesses mix protocol revenue, service fees, token-based compensation, and treasury trading. Structuring and bookkeeping that clearly distinguishes these streams helps ensure the correct tax treatment (the law explicitly notes that non-Article 20E gains are taxed under other parts of the Income Tax law).
- Plan around ring-fenced losses: Disposal losses can typically be used only against disposal gains in the same tax year, with no carry-forward under this mechanism. That makes year-end position management and record accuracy genuinely important.
- Avoid misclassification of mining-related crypto: The special disposal rule does not apply where crypto-assets were acquired through mining activity—so miners and projects with mining components should structure and document carefully from day one.
- Choose the right “who earns the gain”: Whether disposals occur at founder level or within a Cyprus company should match the real business model, governance, and substance. Getting this right early reduces friction with banks, auditors, investors, and counterparties.
- Put governance in place (substance): Board minutes, policies on treasury management, authorised signatories, and documented decision-making are not “paperwork”—they are what makes a structure defensible when money moves cross-border.
- IP Box Regime: Can also take benefit of the IP Box Regime as described above.
Frequently Asked Questions – FAQ on Cyprus Crypto Tax
- When does the Cyprus crypto tax regime start?
From 1 January 2026 (as per the Income Tax amending law’s commencement).
- What is the Cyprus tax rate on crypto disposal gains?
8% on gains arising from disposal of crypto-assets (Article 20E).
- What counts as “disposal” of crypto-assets?
Sale, gift/donation, exchange (crypto-to-crypto), or using crypto as a means of payment.
- Can crypto disposal losses be carried forward?
Losses from crypto disposals can be offset only against crypto disposal gains in the same tax year, and are not carried forward and not surrendered under the referenced group relief mechanisms.
- Does the 8% rule automatically apply to mined crypto?
No. The disposal article states it does not apply where the crypto-assets were acquired through mining activity.
- Where can I learn more about the Cyprus Tax Reform?
We have published an article in our website here – with Frequently Asked Questions on the Tax Reform for businesses which will help you to better understand the changes.
How Asterisk can help
Asterisk Corporate Services is a fully licensed service provider in Cyprus & supports, amongst others, crypto founders and businesses moving to Cyprus or setting up Cyprus structures with a compliance-first approach. Some of the Services we render are: Cyprus company incorporation and ongoing administration, corporate secretarial and governance support, accounting and tax compliance, audit of financial statements — with practical guidance on disposal tracking and documentation so your crypto activity is structured, reportable, and investor-ready. Email us at contact@asterisk.cy for more information.
Disclaimer
This article is for general information only and does not constitute tax, legal, or investment advice. Tax outcomes depend on your specific facts and circumstances. You should obtain professional advice before taking any action.
