As governments across Europe gear up for future reforms, 2026 is shaping up to be a pivotal year in tax policy. From the rollout of digital VAT systems to new transparency demands for large corporations, the next wave of regulation will affect businesses and individuals alike.
With global pressures (from climate regulation to the OECD’s global minimum tax), evolving frameworks are likely to redefine how companies navigate compliance and strategy.
VAT Meets Digital Reality
Among the most transformative changes underway is the EU’s “VAT in the Digital Age” (ViDA) package, adopted in March 2025. This reform introduces mandatory e‑invoicing and real‑time reporting across Member States, with full implementation expected by 2035.
Audit firms foresee a gradual ramp‑up in digital compliance, starting as early as 2026, as Cyprus aligns with EU directives. This shift will reduce VAT fraud but require significant upgrades in accounting systems and training.
Pillar Two and Corporate Minimum Tax
Since January 2024, multinational entities with revenues over €750 million have been subject to a 15% global minimum tax under the OECD/G20 “Pillar Two” framework. Cyprus audit firms expect that in 2026, EU Member States including Cyprus will further standardize enforcement via DAC9 rules, facilitating consistent top‑up tax reporting across borders.
Although Cyprus maintains a low corporate tax base, firms with international operations may face increased “top‑up” liabilities and will rely on local auditors to navigate cross‑border filings.
Carbon Border Adjustment and Clean‑Tax Shifts
The EU’s Carbon Border Adjustment Mechanism (CBAM) began in 2023 with a transition phase for steel, cement, aluminium, fertilisers and electricity emissions. By 2026, exporters may face expanded carbon levies. Cyprus audit firms anticipate advising companies to review supply chains, invest in emissions measurement, and look for green tax credits, especially as the European Commission plans to recommend energy‑tax incentives by late 2025.
Simplification via BEFIT and Transfer‑Pricing Rules
The EU’s BEFIT plan, designed to unify corporate tax bases across Member States, will officially roll out by mid‑2028. But by 2026, draft alignment and transfer‑pricing guidelines will begin to apply. Cyprus audit firms are already preparing clients for these changes, focusing on early adoption to reduce future compliance burdens and help multinational groups manage aggregate tax liabilities more efficiently.
Compliance and Transparency Pressures
New DAC9 and GloBE information‑return directives will require extensive data exchange between tax authorities from 2026 onward. Audit firms expect elevated scrutiny from EU and OECD bodies, meaning detailed country‑by‑country reporting, business restructuring, and perhaps even amendments to existing tax residency rules.
Looking Ahead
Cyprus audit firms view 2026 as a year of transition rather than upheaval. While tighter rules and digital reporting will demand new capabilities from businesses, the gradual rollout provides lead time. Audit providers in Cyprus are gearing up to support:
- Technology integration for VAT and corporate tax filings
- Advisory on Pillar Two impact and DAC9 reporting
- Carbon‑compliance strategies under CBAM
- Preparation for BEFIT and transfer‑pricing norms
Although these projections are not official forecasts, they reflect logical progressions in EU tax strategy. Cyprus audit firms are positioned to guide clients through this next stage of regulatory evolution, one defined by transparency, environmental accountability, and global tax coordination.
