With the introduction of the new tax reform, many are wondering how their everyday finances will be impacted. The tax reform has been designed to reshape the tax system and support economic activity. The changes that have been approved and implemented directly affect both individuals and businesses, with the main goal being, achieving fiscal balance. Specifically, four changes affect banking transactions and have an impact on both personal banking and business banking, simplifying and shaping the financial landscape.
In this blog, we will take you through the four main reforms and how they could impact your transactions.
1. Abolition of Stamp Duty
One of the most significant changes is the complete abolition of stamp duty for all contracts. The abolition of stamp duty reduces both transaction and administrative costs for banks, providing immediate benefits to customers.
Banks will no longer calculate or charge stamp duty on:
- New loan agreements
- Security documents (e.g., mortgages)
- Share purchase agreements
- Other banking services and contracts
2. Tax deductions on Housing Loan Interest
To support reliable borrowers, tax deductions of up to €2,000 per spouse or partner have been introduced for interest paid on loans used to purchase or construct home. These deductions are applied directly to taxable income. To qualify, the loans must be performing or have been restructured, borrowers must demonstrate consistent payment behaviour, and they must meet specific income criteria.
Indicative example: A family paying €5,000 in interest annually can claim a €2,000 deduction on the taxable income of each spouse.
3. Mandatory electronic payment of rents
From now on, rents, whether residential or commercial, must be paid exclusively through the bank. That means via bank transfers, card payments or through online banking. This measure applies to all rental amounts (with no minimum limit). It is important to note that the use of cash or simple cash deposits at the bank counter is not allowed for rent payments.
4. End of Special Defence Contribution on corporate interest
All businesses operating financially in Cyprus are now exempt from paying defence tax on the interest they earn. This means that banks will no longer deduct the Special Defence Contribution from interest on corporate deposits, such as Fixed Term Deposit Accounts. With this measure, which came into effect from January 1st 2026, businesses will have improved liquidity.
