Cyprus’ New 8% Crypto Tax: A Clear and Competitive Framework for Investors
With the implementation of a new 8% flat tax on crypto asset profits, Cyprus has become one of the most appealing destinations for crypto investors and enterprises in Europe, giving both individuals and legal entities a predictable and clearly-defined tax treatment, removing any uncertainty or inconsistency that existed in relation to crypto taxation.
Article 20E of the Cyprus Income Tax Law (No. 118(I)/2002, as amended) (“Income Tax Law”) establishes a transparent, predictable and ring-fenced framework that is applicable to both legal entities and individuals, effective January 1, 2026. This progressive legislation, which was published in the Official Gazette on 31 December 2025, is designed to meet the increasing demand for regulatory clarity in the crypto sector and preserve Cyprus’s status as a tax-efficient jurisdiction for international investment and fintech innovation.
Simultaneously, global transparency initiatives, such as the Crypto Asset Reporting Framework (CARF) and Directive on Administrative Cooperation, 8th amendment (DAC8), will facilitate the automated reporting of crypto transactions, thereby guaranteeing compliance and cross-border information exchange. This new tax reform allows for predicable tax efficiency while complying with international standards.
A Transparent and Clearly Defined Framework for Crypto Taxation
The new changes provide a clear regulatory framework for the taxation of crypto assets in Cyprus.
Starding with the 2026 tax year, the new Article 20E of the Income Tax Law imposes a flat 8% tax on profits / gains realised during a taxable disposal of crypto-assets, as follows:
- Sold for fiat currency
- Exchanged for other crypto assets
- Used of cryptos for payment for goods or services
- Donation or gifting.
Such flat 8% tax rate applies on all Cyprus-based taxpayers, regardless if they are natural persons or companies, and regardless of the size of the profit.
Both “crypto assets” and “disposal” definitions in the Income Tax Law are defined in accordance with the European Union’s Markets in Crypto Assets (“MiCA”) Regulation (EU 2023/1114), for alignment and consistency with the EU crypto-regulatory goals and purposes.
The new 8% tax regime is expected to cover, among others:
- Bitcoin, Ether and other layer-1 / layer-2 coins such as Solana, BNB, and Polygon
- Stablecoins and other MiCA-regulated tokens, such as Tether (USDT) and USDC (Circle)
- Exchange tokens and utility tokens
- Many non-security NFTs and similar digital collectibles, as long as they come under the MiCA definition of “crypto-asset” rather than financial instruments under MiFID II.
The regime operates on a ring-fenced basis; this means that crypto profits / gains are not mixed with other income streams and are wholly separate from other income streams and do not come under the normal progressive tax brackets of the Income Tax Law but rather are subject to the new flat 8% tax rate.
By way of a very simple example:
- A Cyprus tax resident purchases crypto assets for €10,000 and later disposes of it for €30,000 in 2026. The profit is €20,000.
- Pursuant to Article 20E, the income tax on the profit of €20,000 is 8%, that is EUR 1,600, and it does not concern the tax resident’s other income.
Investors are afforded the flexibility to manage their tax positions by being able to offset losses from crypto disposals against other crypto gains within the same tax year.
Planning opportunities for tax optimization
Article 20E does not create a new regime for non-Cyprus residents; it operates within the existing framework.
Cyprus tax residents are subject to taxation on their worldwide crypto gains / profits, while non-Cyprus tax residents are subject to Cyprus taxation only on gains that originate in Cyprus.
This distinction allows for a multitude of opportunities to plan international structures that involve Cyprus as well as for multijurisdictional investors who wish to optimize and reduce their tax exposure.
Under the new tax regime, a Cyprus Holding Company and/or a Cyprus International Trust are ideal vehicles for the holding of and investment into crypto assets, as well as for engaging into business activities related to crypto assets, since Article 20E offers a clear statutory 8% tax rate while preserving treaty access and Cyprus’ broader participation-exemption features for non-crypto investments.
Summary of the main Cyprus legal provisions related to cryptocurrency taxation
Please see below a concise summary of the primary legal provisions that influence the taxation of crypto assets in Cyprus:
- 8% fixed Tax Rate
Profits from the sale, donation, exchange, or expenditure of cryptocurrency will be subject to a fixed 8% tax rate, for both natural persons and legal entities.
- Scope
The new rules apply to both individuals and corporate entities, with Cyprus residents taxed on worldwide gains and non-Cyprus residents on Cyprus-source profits.
- Crypto losses
Crypto losses under the 8% regime are treated as follows:
- Only able to be offset by crypto gains within the same tax year.
- Not eligible to be carried forward.
- They cannot be offset against other forms of income.
By ring-fencing crypto gains and losses within their own tax class, this approach simplifies computations but limited the utilization of losses in volatile markets.
- Definition of “crypto assets”
The definition of “crypto-assets” is provided by the European Union’s Markets in Crypto Assets Regulation 2023/1114 (also known as “MiCA”); they are digital representations of value or of rights that have the potential to bring significant benefits to market participants, including retail holders of crypto-assets, with such value or right being able to be transferred and stored electronically using distributed ledger technology or similar technology.
The definition is broad and encompasses, in principle, asset-referenced tokens, e-money tokens and other crypto-assets under MiCA, provided they are not already taxed under a different specific regime.
- What is considered a “disposal”?
The following are considered “disposals” that necessitate tax imposition:
Selling of crypto assets, giving them away, swapping cryptocurrency for another cryptocurrency, or using crypto to purchase products or services.
- Activities Not Covered by the 8% Rate
Certain activities are excluded from the 8% flat tax rate:
- Mining and Validation exclusion
Any profits from mining, staking in some validation rules, or other creation / validation activities are excluded from the 8% flat tax rate and are taxed under the general Cyprus income tax rules, and its progressive income tax brackets for natural persons and the normal corporate tax for companies. This is due to the fact that mining is considered as a taxable business activity and not a mere asset disposal.
- Non-Disposal Acquisitions exclusion
Certain crypto assets acquired without a direct sale or exchange may excluded from the 8% flat tax rate. Examples include:
- Forks – automatic receipt / delivery of new coins following a blockchain split.
- Airdrops – free token distributions, frequently conducted for promotional or governance objectives.
- Staking rewards – tokens earned / acquired for locking assets with a platform or participating in network operations.
- Fallback rule
Any crypto-related profit that do not qualify under the new Article 20E (such as mining, staking in some validation roles, or other creation/validation activities, which are taxed as normal income) is subject to taxation in accordance with the standard provisions of Parts III and V of the of the Income Tax Law.
- VAT Exemption
The exchange of cryptocurrencies for fiat currency is generally exempt from Value Added Tax (VAT), in line with the European Court of Justice ruling C-264/14.
Why choose Cyprus: A Business Hub of strategic importance
Cyprus offers a wide array of significant tax advantages and tax exemptions for a Cyprus company that can be used for a variety of purposes, including but not limited to, holding assets and shares in other companies, use as an investment vehicle, setting it up as part of a global structure of group of companies or as a place of headquarters for conducting international business.
Cyprus’s new crypto tax regime is a valuable addition to its overall reputation as a business-friendly jurisdiction, with competitive advantages that extend beyond crypto assets. The low corporate tax of 15% of Cyprus, its modern and transparent legal and regulatory framework that is based on common law and is compliant with international standards, the ease of setting up Cyprus companies and investment vehicles such as international trusts, makes Cyprus very appealing to fintech companies, crypto exchanges and any individuals or companies who wish to optimize their tax exposure and do business in Cyprus.
The Cyprus tax authorities do not impose any restriction on repatriation of profits, funds or assets, and there is no imposition of withholding taxes on dividends, interest, or royalties that are paid to non-Cyprus residents, unless the recipients are residing in European Union’s blacklist of non-cooperative jurisdictions.
Comparative Context: How Cyprus Measures Up
Comparing to other European countries, Cyprus’s fixed 8% rate is one of the lowest crypto tax rates in Europe:
| Country | Crypto Tax Treatment |
|---|---|
| Cyprus | 8% flat on crypto disposals |
| Germany | 0% > 12 months; otherwise taxed as income and subject to up to 45% income tax |
| United Kingdom | 18% – 24% capital gains tax (above £3,000 allowance) |
| Spain | 19% – 28% savings income tax |
| Portugal | 28% rate (for short-term cryptocurrency capital gains held for less than 365 days) |
| France | ~30% including social charges |
| Ireland | ~33% standard capital gains (with a yearly exemption of €1,270 for net gains) |
| Italy | ~33% capital gains tax (for gains exceeding €2,000 in a fiscal year) |
| Netherlands | ~36% on notional returns / ~36% tax on unrealized capital gains |
This serves to illustrate that Cyprus provides a tax environment that is exceedingly competitive for crypto investors, founders and Web3 businesses.
Conclusion
The introduction of the new 8% crypto tax regime, marks a new era in Cyprus digital asset policy, and establishes Cyprus as a transparent jurisdiction with adherence to international tax compliance standards in which both individuals and companies can enjoy tax efficiency with regulatory clarity, when it comes to their crypto assets.
The compliance and adherence to CARF and DAC8 further strengthens the transparent reporting of crypto gains, providing predictability and stability in crypto investors, founders and businesses.
How Paris Mavronichis & Co LLC can assist you
The new 8% crypto regime is a positive development in the direction of greater transparency; however, it also raises technical inquiries regarding classification, sourcing, loss utilization, and interaction with other sources of income. Investors and companies should prepare accordingly to navigate the new tax regime in order to remain compliant while optimizing their tax position.
We are capable of providing support in the following areas:
- Incorporate and set-up tax efficient and crypto friendly structures, such as a Cyprus Company, a Cyprus Holding Company and a Cyprus International Trust.
- Examining whether specific tokens, NFTs, or instruments are classified as “crypto assets” under Article 20E and MiCA.
- The interplay with Cyprus tax residency and double tax treaties, as well as the development of suitable holding, investment and trading structures for individuals, founders, institutions, and businesses.
- The preparation or evaluation of models that predict the effective tax rates under a variety of market scenarios, while taking under consideration the loss-ring-fencing rules.
- Supporting the creation of audit-ready records and accurate gain and loss calculations through the implementation of systems and proper documentation.
Our specialist lawyers in collaboration with our external accountant/auditor associates are available to offer personalized guidance under Cyprus and EU law if you wish to discuss the potential impact of the new 8% crypto tax on your unique circumstances or future endeavours.
Please feel free to contact us if you have any question and to discuss how we can be of assistance to you.
DISCLAIMER:
PARIS MAVRONICHIS & CO LLC accept no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.
The material contained herein is provided for informational purposes only and does not constitute legal advice nor is it a substitute for obtaining legal advice from an advocate. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced advocate. PARIS MAVRONICHIS & CO LLC will be glad to assist you in this respect.
