• Corporate Tax Rate
-15% corporate tax rate, making it a highly competitive jurisdiction for businesses.
-Tax applies to worldwide income of Cyprus tax-resident companies. A company may become tax resident through management and control in Cyprus or by incorporation in Cyprus (unless a double tax treaty provides otherwise).
• Capital Gains Tax
-Gains from the disposal of qualifying securities (including shares, bonds and other qualifying financial instruments) are exempt from Cyprus income tax and capital gains tax, which is highly beneficial for businesses and individuals holding or trading securities.
• Dividends Tax
-No withholding tax on dividends paid to non-residents.
-Dividends received by Cyprus tax residents from foreign companies are generally exempt from tax, subject to certain conditions, making Cyprus a favorable jurisdiction for holding companies.
-The Special Defence Contribution (SDC) tax rate on actual dividend distributions to Cyprus tax-resident and domiciled individuals has been reduced to 5% (previously 17%).
-The deemed dividend distribution rules have been completely abolished for profits generated from 2026 onwards.
-SDC on rental income has been fully abolished.
-Accounting Profits from 2024 and 2025 which will be distributed during 2026 and 2027 respectively are still subject to 17% SDC.
-Cyprus generally does not impose withholding tax on dividends paid to non-residents, however, anti-abuse rules impose a 17% withholding tax on dividend payments to associated companies resident in non-cooperative jurisdictions, with the rules extending to certain low-tax jurisdictions from 2026.
•Interest Income Tax
-Interest earned in the ordinary course of a company’s business is taxable at the corporate income tax rate of 15%. Passive interest may be subject to different rules depending on the taxpayer and circumstances.
-Individuals – Interest income earned by Cyprus tax-resident individuals is generally subject to SDC at 17% and GESY contributions at 2.65%.
However, anti-abuse rules impose a 17% withholding tax on interest payments to associated companies resident in non-cooperative jurisdictions, with the rules extending to certain low-tax jurisdictions from 2026.
• Intellectual Property (IP) Box Regime
-Cyprus has a highly attractive IP box regime which offers tax exemptions on qualifying income derived from IP rights.
-The IP Box provides an 80% exemption on qualifying IP income, resulting in an effective corporate tax rate of approximately 3% on qualifying profits.
This regime encourages the establishment of intellectual property holding companies in Cyprus.
• Tax Treaties
-Cyprus has signed double taxation treaties with over 65 countries, ensuring reduced withholding tax rates on dividends, interest, and royalties between Cyprus and treaty countries.
-These treaties help reduce the risk of double taxation for businesses operating internationally.
• Value-Added Tax (VAT)
-Standard VAT rate: 19%, which is in line with the EU VAT rate.
-Cyprus applies reduced VAT rates of 9% and 5% to specified goods and services, including certain residential supplies, pharmaceuticals, books and other qualifying items, subject to the VAT legislation.
-Cyprus also has VAT exemptions for certain financial services, insurance, and exports, which can benefit businesses in these sectors.
• Social Insurance Contributions
-Employers and employees are required to make Social Insurance contributions in accordance with the applicable statutory rates and contribution ceilings.
-Self-employed individuals contribute according to their income level.
• Non-Domiciled Tax Status
-Individuals who are Cyprus tax residents and are not considered domiciled in Cyprus may benefit from significant tax advantages. An individual is generally considered domiciled in Cyprus if they have a domicile of origin in Cyprus or have been a Cyprus tax resident for at least 17 years out of the previous 20 years for Special Defence Contribution (SDC) purposes.
-Non-domiciled individuals may benefit from exemptions from SDC on:
- Worldwide dividend income.
- Interest income.
-Cyprus does not impose inheritance tax on assets held in Cyprus.
-From 2026, individuals who have exhausted their 17-year non-dom period may extend non-dom status for up to two additional five-year periods (10 years in total) by paying a lump sum of €250,000 per period, providing significant continued tax planning opportunities.
-These provisions make Cyprus an attractive destination for expatriates, internationally mobile individuals, and investors seeking favourable tax treatment.
• Corporate Tax Reliefs and Allowances
-Loss Carry Forward: Losses can be carried forward for up to 7 years (extended from the previous 5 years) to offset future profits, reducing taxable income in subsequent years.
-Investment Tax Credit: Companies investing in research and development (R&D) may benefit from a 120% super-deduction on qualifying R&D expenditure, extended until 2030 under Cyprus’ innovation tax framework.
• Personal Income Tax
-Cyprus offers a progressive personal income tax rate with the following updated brackets effective from 2026:
- Up to €22,000: 0% (tax-free threshold, increased from €19,500)
- €22,001 – €32,000: 20%
- €32,001 – €42,000: 25%
- €42,001 – €72,000: 30%
- Above €72,000: Higher rate applies at 35%
-There are also tax exemptions for certain income types, such as foreign pensions and employment income under specific conditions.
-There are also extra tax exemptions if the family income is below the thresholds, then the individuals have extra deductions for rent expense and interest expense with the maximum claim up to €2,000 per family.
For each depended child, an extra deduction is given, for 1 child, is €1,000 for the second is €1,250 and for the third €1,500. There is no further deduction for more than 3 children.
Extra deduction of €500 for insurance of their house.
In addition, the last extra deduction given is for the expenses paid from 01.01.2026 onwards for the house energy improvements for the amount up to €1,000 per family per year.
• Incentives for Investment and Startups
-R&D Tax Incentives: Companies investing in research and development are eligible for a 120% super-deduction on qualifying R&D expenses, extended until 2030.
-Startup Support: Cyprus offers various innovation and startup support schemes through government and EU-funded programmes, which may vary over time to encourage new businesses, particularly in innovation and technology sectors.
• Inheritance Tax
-Cyprus does not impose inheritance tax, making it an attractive jurisdiction for estate planning.
• Transfer Pricing Rules
-Cyprus adheres to OECD transfer pricing guidelines, which require businesses to conduct transactions at arm’s length, ensuring fair and transparent pricing practices for tax purposes.
-Based on the Cyprus tax in case the transactions between related parties are above the following thresholds the Company have the obligation to prepare a local file in Cyprus:
- Financial Transactions €10,000,000
- Goods €5,000,000
- Services €2,500,000
• Crypto Asset Taxation
-Profits arising from the disposal of crypto-assets, including sale, exchange, donation, or use as payment, are now subject to a flat 8% tax rate.
-Crypto-assets acquired through mining are exempt from this regime.
-This brings Cyprus in line with evolving international standards on digital asset taxation.
-Current-year crypto losses may be offset against current-year taxable crypto gains but cannot be carried forward.
• Stamp Duty
-Stamp duty has been fully abolished as part of the 2026 tax reform, eliminating a longstanding cost associated with legal and commercial documentation in Cyprus.
• Annual Tax Filing Obligations
-All individuals that are tax resident in the republic and have taxable income and also individuals aged 25 and over are now required to submit an annual income tax return, regardless of whether taxable income was earned during the year.
-Enhanced enforcement powers have also been granted to the Tax Commissioner to strengthen compliance.
• Corporate Tax Residency
-A company is considered tax resident in Cyprus if it is managed and controlled in Cyprus.
-In addition, a company incorporated in Cyprus is deemed to be a Cyprus tax resident unless another jurisdiction considers it as a tax resident in their country based on their applicable laws.
This article does not constitute a legal opinion or advice. It is merely for educational purposes. Independent legal advice should be obtained from experts, particularly with regards to the relevant laws of other jurisdictions.
