Crypto & Web3
From 1 January 2026, Cyprus introduces a flat 8% Special Defence Contribution rate on crypto-asset disposal gains realised by Cyprus-resident individuals, replacing the previous unclear treatment under the SDC Law and the Income Tax Law. We walk through what's covered (BTC, ETH, stablecoins, staking, mining), what's exempt (CASP-licensed corporate trading), and how non-doms are affected.12 min read · By Nexora Cyprus editorial team · Reviewed by an ICPAC-registered Cyprus tax adviser engaged by Nexora
Quick Summary
Cyprus introduces a flat 8% Special Defence Contribution on crypto-asset disposal gains for Cyprus-resident, domiciled individuals from 1 January 2026. Non-doms remain at 0%. Corporate trading and CASP-licensed entities are taxed under separate regimes (15% CIT, IP Box where applicable). Mining and staking rewards are taxable as income, not capital gains. Holding ≥12 months is no longer a precondition.
Before 2026, the Cyprus tax treatment of crypto-asset gains for individuals was unclear. The Cyprus Tax Department took the position that occasional disposal gains by individuals were generally not taxable (no general capital gains tax on movables in Cyprus), but trading income — where the volume / frequency / pattern looked like a business — could be assessed as Income Tax under the trading-income provisions. Practitioners were divided on where the line fell.
From 1 January 2026, the Special Defence Contribution Law (Law 117(I)/2002, as amended) introduces a flat 8% SDC rate on crypto-asset disposal gains realised by Cyprus-resident, domiciled individuals. The rate applies regardless of holding period and regardless of whether the activity rises to the level of 'trading'. This brings clarity and a competitive headline rate (vs. Germany 25–45%, UK 18–28%, US 15–37%).
The new 8% rate applies broadly to 'crypto-assets' as defined under the EU MiCA framework (Regulation 2023/1114). This includes:
Mining and staking rewards are NOT crypto disposal gains — they are crypto income (you receive new tokens for performing a service). Mining rewards are taxable as Income Tax for individuals (subject to standard personal income tax rates: 0% on first €19,500, sliding to 35% above €60,000). Staking rewards follow the same treatment.
Once received, the cost basis of the mined / staked tokens is the fair market value at the time of receipt. Subsequent disposals trigger the 8% SDC on the gain or loss vs. that cost basis.
Non-doms are exempt from SDC on the disposal gains (per the standard non-dom rules) but Income Tax on the receipt of mining / staking income still applies to non-doms (Income Tax is not exempted by non-dom status — only SDC is).
Crypto disposal losses can be offset against crypto disposal gains in the same tax year. Net annual losses can be carried forward indefinitely against future crypto gains under the standard SDC loss-carry-forward provisions. Losses cannot be cross-set against other Income Tax categories (e.g., you can't use crypto losses to offset salary income).
From FY2026 onwards, Cyprus-resident individuals must declare crypto disposal gains on their annual personal tax return (IR1) under a new dedicated section. The disposal date, asset, cost basis, sale proceeds, and resulting gain or loss must be itemised. Cost-basis methodology is FIFO (first-in-first-out) by default unless the taxpayer elects an alternative consistent method.
Non-doms must still declare the gains for transparency / non-dom-status verification purposes, even though no SDC is owed.
For non-doms, Cyprus is now arguably the most attractive crypto-personal-tax jurisdiction in the EU: 0% on disposal gains for 17 years, 0% on staking-token disposals (the staking income itself is taxed but most non-doms structure to keep this minimal). The 8% headline rate for domiciled residents is also competitive — well below Germany, UK, US.
For corporate crypto operations (trading desks, market makers, CASP licensees), the SDC change is irrelevant — they're already on 15% CIT. But the regulatory clarity helps with banking and PSP relationships.
For founders sitting on large crypto positions accumulated pre-2026, the new regime applies on disposals from 1 January 2026 onwards. Pre-2026 gains — where individuals genuinely held and were not trading — were typically not taxable in Cyprus (general no-CGT-on-movables rule). The new 8% rate creates a clean prospective regime; it does not retrospectively tax old positions.
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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.
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