Cyprus' long-standing position as an international business centre rests, above all, on its legislation. Its tax law and double tax treaties give investors clear rules and competitive rates on which to base their decisions.
Corporation tax & Special Defence Contribution
A company is taxed in Cyprus if its management and control is exercised in Cyprus — the major factor being where the board of directors usually takes decisions. Companies incorporated in Cyprus are, by default, also treated as Cyprus tax resident unless they are tax resident elsewhere.
- Trading profits (goods, services, consulting) are taxed at 15% corporation tax — increased from 12.5% on 1 January 2026, in line with the OECD global minimum
- Special Defence Contribution (SDC) on dividends applies only when the owner is Cyprus tax resident and domiciled — at 5% from 1 January 2026 (reduced from 17%); the deemed dividend distribution rules are abolished for 2026 profits onwards
- Profit from a permanent establishment abroad is generally not taxable in Cyprus (the exemption is denied for permanent establishments in EU non-cooperative jurisdictions)
- Tax losses may be carried forward for up to 10 years (extended from 5 years by the 2026 reform, subject to conditions); group loss relief also applies
- Foreign tax levied on the same income can be deducted from Cyprus tax arising on that income
- Cyprus does not impose withholding tax on interest paid to non-resident recipients, save for limited exceptions (e.g. payments to EU non-cooperative or certain low-tax jurisdictions)
- Profit from sale of shares and other titles is not taxable in Cyprus
- Dividends received by a Cyprus company are generally exempt from tax
VAT
- Standard VAT rate: 19%
- Reduced rates of 3%, 5% and 9% apply to specific categories
- Registration threshold: €15,600 annual turnover
Personal income tax
- Individuals resident in Cyprus for more than 183 days per year are taxed on worldwide income
- Tax-free threshold of €22,000 from 2026, with progressive bands of 20%, 25%, 30% and 35% (the top rate applying above €72,000)
- Non-domiciled individuals are exempt from SDC on dividends and interest received
- Special incentive: 50% exemption on remuneration from first employment commencing in Cyprus, where annual remuneration exceeds €55,000 — available for up to 17 years
- Pension received from abroad may be taxed at a flat 5% (first €5,000 exempt — raised from €3,420 by the 2026 reform)
Social insurance & GHS contributions (rates as at 2026)
- Social insurance — employee: 8.8%; employer: 8.8% (plus Redundancy Fund 1.2%, Industrial Training 0.5%, Social Cohesion Fund 2.0%)
- Social insurance — self-employed: 16.6%
- General Healthcare System (GHS) — employee: 2.65%; employer: 2.90%; self-employed: 4.00%
Cyprus company tax planning structures
- Investment holding company — leveraging EU directives and double tax treaties to receive dividends and capital gains largely exempt from tax
- Finance company — acting as intermediary or direct finance vehicle; taxed only on net interest margin
- Trading company — establishing EU presence and VAT number; profit taxable in Cyprus after deducting business expenses
- IP & royalty company — an 80% deduction applies to qualifying IP profits under the Cyprus IP box (nexus approach)
- Double tax treaty network — treaties with 65+ countries plus full EU directives including the Parent-Subsidiary Directive
The figures above reflect the tax reform in force from 1 January 2026. For what changed and why, see our note on the 2026 reform.
This is a basic review of Cyprus tax law and should not be used to form an opinion without professional advice. Rates and thresholds change; contact us for guidance specific to your situation.