Cyprus Capital Allowances + Depreciation 2026 — Rates Per Asset Class, Accelerated Schemes

1. Standard capital allowance rates (selected)

Rates apply on a straight-line basis (standard regime, assets acquired from 1 January 2019). Application software costing under the de-minimis threshold may be expensed in year one; confirm the rate for a specific asset before relying on it.

2. Accelerated allowances

Cyprus offers accelerated capital allowances for specific asset classes encouraging investment + sustainability:

• Energy-saving plant + machinery: 20% per annum (vs standard 10%).
• Computers + servers + IT infrastructure: 20% per annum.
• Photovoltaic + renewable-energy installations: accelerated rates available under specific schemes.
• Robotic automation equipment: accelerated rates considered case-by-case.
• Agricultural + livestock-farming machinery and facilities: 25% per annum accelerated allowance — introduced by the 2026 tax reform.

3. Worked example

Cyprus Ltd buys €100,000 of computer servers (20% accelerated rate):

• Year 1: €20,000 capital allowance deducted from taxable profit. Tax saving at 15% CIT: €3,000.
• Year 2: €20,000 capital allowance. Tax saving: €3,000.
• Years 3-5: €20,000 each, total saving: €9,000.
• Cumulative tax saving over 5 years: €15,000 (= 15% × €100,000 cost).

4. Specific Cyprus considerations

• Asset must be used 'wholly and exclusively' for business — mixed-use apportionment required.
• Capital allowance computed from year of acquisition (or commencement of use, whichever later).
• Disposals — balancing charge / allowance applied on the difference between disposal proceeds + tax written-down value.
• VAT treatment separate (input VAT recoverable on most business capex if VAT-registered).
• R&D-specific assets: may qualify for additional 20% R&D super-deduction (2026 reform).

5. Treatment on disposal

When a depreciated asset is disposed of:

• BALANCING CHARGE — if disposal proceeds > tax written-down value, the EXCESS is treated as taxable income (claws back over-claimed allowances).
• BALANCING ALLOWANCE — if disposal proceeds < tax written-down value, the SHORTFALL is treated as a final deduction (additional tax relief).
• Disposals to associated parties: arm's-length value rules apply.

6. Anti-abuse principles

• Sale-and-leaseback transactions designed solely for allowance acceleration may be challenged.
• Pre-disposal capital allowances of an asset about to be sold may face anti-abuse adjustment.
• Disposals to associates at non-arm's-length values may trigger Tax Department recharacterisation.

Frequently Asked Questions

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Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Tax laws change frequently. Consult a qualified Cyprus adviser for guidance specific to your situation. The information on this page is general guidance only and does not constitute legal, tax, accounting, immigration or financial advice. Specific advice should be obtained based on the facts of each case.