Cyprus Crypto Tax: 8% Flat Rate on Crypto Disposal Gains
1) What changes and when
Cyprus’ Income Tax Law is being amended to introduce a flat 8% tax on gains from disposals of crypto-assets, effective 1 January 2026 (tax year 2026 onward) to make Cyprus Tax on Crypto more clear.
- Article 20E (new) imposes 8% on profits from the disposal of crypto-assets held by Cyprus Companies or individuals. Losses from crypto transactions are deductible only against crypto gains (same or future years as provided in the article).
- Law commencement: “This Law is expected to enter into force on 1 January 2026.”
- Corporate rate: Currently at 12.5%, is expected to increase to 15% when the new legislation is enacted from 1 January 2026. Also worth noting that when Article 20E applies, those crypto gains are taxed separately at 8% and are not added to the company’s other taxable income. The draft text is explicit that the profit taxed at 8% “is not added to any other income.
2) What counts as a “crypto-asset” (legal definition)
The new law directly references the EU Markets in Crypto-assets Regulation (MiCA) and adopts its definitions. According to Regulation (EU) 2023/1114, Article 3(1)(5):
“‘Crypto-asset’ means a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology.”
The bill states that terms used “have the same meaning as in Regulation (EU) 2023/1114…”.
3) What is a “disposal” for the 8% charge
For Article 20E purposes, “disposal” includes (non-exhaustive):
- sale, exchange, redemption, or other transfer;
- use of a crypto-asset to discharge an obligation;
- conversion of one crypto-asset into another;
- providing goods or services in exchange for a crypto-asset.
Not covered by Article 20E: profits arising from mining/validation (issuance/verification activities); such profits are taxed under the general provisions of the Income Tax Law, not at the special 8% rate.
4) Why this is a big win for Crypto Companies in Cyprus
- Clear, statute-based rate: A dedicated 8% on crypto disposal gains in primary law gives certainty for treasury planning and exit events (M&A, treasury rebalancing, token conversions).
- Loss matching within the class: Crypto losses reduce only crypto gains, which preserves the 8% regime’s integrity and simplifies forecasting for token-heavy treasuries.
- Aligned with MiCA: By incorporating MiCA terminology, Cyprus reduces definitional disputes and supports consistent treatment across EU-facing businesses.
- Broader 2026 framework is competitive: From 2026, companies face a 15% CIT (aligned with global minimum tax dynamics), while there is no dividend taxation on non-resident / non-dom individuals & entities (minimum exceptions apply). This balanced package supports holding, protocol, trading and infrastructure models headquartered in Cyprus.
You can read more about Why Cyprus to start your business here.
5) Dividend taxation refresh that complements the crypto regime (from 2026)
- Resident individuals: 5% Special Defence Contribution (SDC) on dividends received, with anti-avoidance and coordination rules.
- Transitional 17% windows: Certain distributions linked to profits up to 2025 (including specific timing and liquidation cases) remain at 17% during defined periods, to close-out the old system.
- Deemed dividend distribution (DDD): Transitional rules apply for 2024–2025 profits; the new framework then supersedes older DDD mechanics for subsequent years.
- Law start: SDC amendment also starts 1 January 2026.
- Non-dom individuals are exempt from SDC on dividends (exceptions may apply).
Why this matters: low, predictable dividend leakage (5% for resident individuals in scope) together with a known 8% crypto-gains rate improves post-tax returns for founders/teams and internal capital recycling for crypto groups.
6) Compliance basics (what to prepare)
- Record-keeping: Track acquisition cost, date/time, consideration, gas/fees, and the disposal event type (sale, conversion, settlement, etc.) to support Article 20E computations. (Scope and events per Article 20E.)
- Filing & payment timeline: The Assessment & Collection law sets general return/payment mechanics. Notably, from tax year 2026, the filing due dates in certain cases fall on 31 July or 31 January of the following year, depending on return type. Coordinate your corporate and personal calendars accordingly.
Above list is not exhaustive and its advisable to contact a tax professional on what documents to keep.
7) Legislative intent (context within the 2025 Tax Reform)
This amendment forms part of the broader 2025 Tax Reform, aimed at:
- creating a fairer and more balanced tax system;
- encouraging innovation and aligning Cyprus’ framework with technological and financial developments;
- strengthening compliance and reducing tax avoidance;
- providing certainty for new economic activities, including digital and crypto assets.
(Intent summary provided for context; operational rules and rates are those cited above from the bills.)
8) Practical takeaways for crypto businesses
- If enacted as drafted, from 1 Jan 2026 crypto disposal gains realised by Cyprus taxpayers are 8%, with losses offsettable only within crypto. Plan treasury and tokenomics around disposal points (e.g., rebalancing, redemptions, conversions).
- Structure distributions and exits with the 5% SDC (resident individuals) and CIT 15% in mind, noting transitional 17% where legacy profits are involved.
- Map operations that do not fall under Article 20E (e.g., mining/validation rewards) to the general income tax computation.
9) Worked example
- Company realises €1,000,000 gain on BTC disposals and €200,000 losses on other crypto disposals in the same year → Net crypto gain = €800,000 → 8% tax = €64,000.
- Losses from prior years cannot be used; losses cannot offset non-crypto income.
Snapshot
- Expected Start date: 1 January 2026.
- Crypto gains rate: 8% on disposal profits (Article 20E).
- Disposals include: sale/exchange/redemption; using crypto to settle obligations; crypto-to-crypto conversions; payment for goods/services.
- Exclusion: mining/validation income not taxed under Article 20E.
- Losses: offset only against crypto gains and cannot be rolled-forward.
- MiCA alignment: terms follow Reg. (EU) 2023/1114.
- CIT: 15% from 2026.
- Dividends (resident individuals): 5% SDC from 2026; transitional 17% applies to specified pre-2026 profits/distributions. No tax on dividends for non-residents / non-dom individuals (minimum exceptions apply).
How Asterisk can help
At Asterisk Corporate Services we specialize in the provision of services to companies operating in the Crypto & Digital Asset space. We can set up your Cyprus structure, implement IFRS-aligned crypto accounting, coordinate audit, and design compliant operations and dividend policies under the new rules once enacted. Email us at contact@asterisk.cy for more information.
Disclaimer: Information presented aboveis based on draft Cyprus tax bills (Nov 2025) and is for general guidance only; it does not constitute tax or legal advice. Final provisions may change—please obtain tailored advice before acting.
