The headline rate
Cyprus has long applied a 12.5% corporate income tax on a company's worldwide profits (for Cyprus tax residents), one of the lowest headline rates in the EU. Important for 2026: a tax-reform package debated through 2025–2026 proposes raising the rate toward 15%, aligning Cyprus with the OECD Pillar Two global minimum tax for large multinational groups. Confirm the rate in force before you model anything.
What makes the regime attractive beyond the rate
- Participation exemption — dividends received are generally exempt, and profits from the disposal of securities (e.g. shares) are exempt from corporate tax.
- No withholding tax on outbound dividends, interest and (in most cases) royalties to non-residents.
- IP Box — an OECD-compliant regime giving an 80% notional deduction on qualifying IP profits, for an effective rate that can fall to around 2.5%.
- Notional Interest Deduction (NID) on new equity, reducing the effective tax on equity-financed companies.
- Extensive treaty network reducing foreign withholding taxes.
Tax residency of a company
A company is Cyprus tax resident if it is managed and controlled in Cyprus — board meetings, decision-making and key directors located on the island. Recent rules also treat a Cyprus-incorporated company as resident unless it is tax resident elsewhere. Substance is essential to support residency.
Other taxes to know
- VAT at a standard rate of 19%, with reduced rates of 9%, 5% and 0% for specific categories.
- Special Defence Contribution (SDC) on certain passive income of Cyprus-domiciled residents — but non-doms are exempt (see our non-dom guide).
- No inheritance tax (abolished in 2000) and no wealth tax.
What the reform may change
Beyond the headline rate, the reform discussion has touched on the SDC on dividends, incentives for green and digital investment, and personal-tax bands. Because these proposals are moving, treat any specific figure as provisional until enacted.
Tax structuring is fact-specific. A tax & wealth lawyer can model your position under the current and proposed rules.