In 2026, Paphos finally transformed from a purely resort destination into a dynamic business hub. The Republic of Cyprus is actively encouraging international companies to relocate their headquarters to the region, creating a strong demand for office and retail space. Investments in Paphos’s commercial sector are currently attractive due to its lower entry barriers compared to Limassol and stable returns of 6-9% per annum . When planning a transaction, it is important to consider the significant changes to the tax code that came into effect on January 1, 2026, which significantly impact business net profits.
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Market segments and cost per square meter
The Paphos commercial market is expected to see growth in the high-tech office and tourism retail segments in 2026. Thanks to the expansion of the road network and the renovation of urban infrastructure, the liquidity of properties in the city center and coastal areas has reached peak levels.
| Property type | Location | Price per 1 sq. m (2026) | Average ROI |
| Class A (Smart) offices | Paphos City Center / Anavargos | 3,500 – 5,800 euros | 7.0% – 8.5% |
| Retail (Shops/Cafes) | Kato Paphos / Coral Bay | 4,500 – 9,000 euros | 5.5% – 7.0% |
| Warehouses and logistics | Geroskipou / Mesoji | 1,400 – 2,300 euros | 8.0% – 10.0% |
| Class B offices | Ellados Avenue | 2,200 – 3,100 euros | 6.5% – 7.5% |
Prices for new projects in the city center include modern Class A energy efficiency systems, which will be a mandatory requirement for most corporate tenants in 2026.
Tax Reform 2026: What Investors Need to Know
From 1 January 2026, updated tax rules will be in effect in the Republic of Cyprus. These rules simplify transaction structures but increase requirements for business transparency.
- Corporate Tax: The corporate income tax rate has been increased from 12.5% to 15% .
- Stamp Duty Abolition: Stamp duty has been completely abolished for all contracts signed from the beginning of 2026. This represents a direct savings for large commercial projects.
- Dividend tax: For tax residents, the Special Contribution for Defense (SDC) rate on dividend distributions has been reduced from 17% to 5% , making real estate ownership through a legal entity more advantageous. Non-DOM status holders are exempt from SDC.
- Capital Gains Tax: When reselling an asset, the tax is 20% of the net profit, but the tax-free limit is increased to €30,000 in 2026 .
- VAT: Purchases of new commercial buildings are subject to a 19% tax rate . This tax is refundable if the property is used for VAT-taxable activities (e.g., rented out as an office or shop).
Priority locations for business
Choosing a neighborhood in Paphos determines your tenant’s target audience:
- City Center: The epicenter of office life. Government agencies, banks, and new business centers are concentrated here . Demand for offices ranging from 100 to 300 square meters exceeds supply.
- Kato Paphos: A tourist retail zone . In 2026, space for restaurants, boutiques, and tourist service outlets will be in demand here. Beachfront properties have the highest market capitalization.
- Anavargos: A neighborhood near a hospital and international schools, this area is seeing the rapid development of modern office space geared toward medical centers and educational startups.
- Geroskipou: A prime area for warehouses and showrooms. Its proximity to the highway and airport has made this area Paphos’s logistics hub.
Permanent residence for commercial investment
The Cyprus Permanent Residency by Investment program remains one of the main market drivers in 2026. By investing at least €300,000 (+VAT) in a new office, store, or hotel unit, you and your family gain residency. Unlike residential property, commercial properties allow investors to legally generate rental income within the country, making this strategy more cost-effective.
Purchasing commercial property in Paphos in 2026 requires a thorough title deed audit and building compliance with new sustainability standards. The high liquidity of office space in the city center and retail in tourist areas ensures reliable capital protection in the Republic of Cyprus.
