Corporate taxes in Cyprus are a key factor in the jurisdiction’s appeal to foreign investors. This page provides essential information on taxation principles, as well as the types and rates of business taxes currently in effect in the Republic of Cyprus.
Tax Residency
Corporate Tax Residency in Cyprus
Cypriot tax-resident companies are subject to corporate income tax on their worldwide income. In contrast, non-resident companies are only taxed on income derived from sources within Cyprus.
A company is deemed a tax resident of Cyprus if:
- Its management and control are exercised in Cyprus; or
- It is incorporated in Cyprus in accordance with the Companies Law.
Historically, the “management and control” has served as the primary test for determining corporate tax residency. To establish whether management and control are exercised within Cyprus, the following factors are typically taken into account:
- Composition of the Board of Directors: A majority of the directors should be tax residents of Cyprus.
- Location of Board Meetings: Meetings must be held, and key strategic decisions must be made, within the territory of Cyprus.
- Financial Oversight: The location where financial statements are discussed and formally approved.
- Operational Control: Whether the directors maintain control over the company’s Cypriot bank accounts and other essential administrative functions.
Company registration in Cyprus is now a stand-alone ground for tax residency. While the “incorporation” test previously served as a supplement to the “management and control” test, as of 2026, incorporation has become an independent and sufficient criterion for determining tax residency.
A company incorporated in Cyprus is recognized as a Cypriot tax resident regardless of whether it is considered a resident by another country (except in cases where residency is determined under a Double Tax Treaty). Furthermore, companies that have redomiciled to Cyprus are also treated as being incorporated in Cyprus.
Personal Tax Residency
There are two alternative sets of criteria for an individual to be recognized as a tax resident of Cyprus.
The first option is the classic “183-day rule”: an individual is considered a tax resident if they are physically present in Cyprus for more than 183 days during a calendar year.
The second option is the “60-day rule”, which allows an individual to qualify as a Cypriot tax resident if, during the relevant year, they satisfy all of the following conditions:
- They do not reside in any other single state for more than 183 days in total.
- They are not considered a tax resident by any other state.
- They spend at least 60 days in Cyprus.
- They have other ties to Cyprus, namely, being engaged in business or employment in Cyprus, or being a director of a Cypriot company. The individual must also own or rent residential property in Cyprus.
Corporate Income Tax in Cyprus
In Cyprus, corporate income tax (CIT) is levied on business profits, as well as other forms of income including interest, royalties, and rental income. Expenses incurred solely for the production of taxable income are fully deductible, provided they are supported by proper documentation.
Tax losses can be carried forward to offset future profits. Tax paid in a foreign country can be credited against the Cyprus tax liability on the same income. This credit is granted unilaterally, regardless of whether a Double Tax Treaty (DTT) exists with that country.
Effective from 1 January 2026, the standard corporate tax rate in Cyprus has increased to 15% (from the previous 12.5%).
Dividends received by Cyprus-resident companies from either local or foreign entities are generally exempt from tax (subject to certain anti-avoidance conditions). Profits from the disposal of shares, bonds, and other qualifying securities are exempt from corporate tax.
Annual corporate tax returns must be filed no later than 13 months following the end of the reporting year, meaning the deadline is 31 January of the second year following the tax year (applicable to tax years starting from 2026). Previously, this deadline was 15 months, falling on 31 March of the second year following the reporting period.
Capital Gains Tax
In Cyprus, Capital Gains Tax (CGT) is levied at a rate of 20% on gains derived from:
- The disposal of real estate situated in Cyprus (provided they are not subject to income tax); and
- The disposal of shares in unlisted companies that directly or indirectly own such real estate.
In the case of a share disposal, CGT is applicable if the underlying real estate accounts for at least 20% of the market value of those shares (a threshold reduced from 50% for tax years prior to 2026). Notably, gains from the sale of shares listed on a recognized stock exchange remain exempt from Capital Gains Tax.
Withholding Tax (WHT)
As a general rule, Cyprus does not levy withholding tax on dividends and interest paid by a Cypriot company to non-residents (whether corporate entities or individuals).
Regarding royalties paid to non-residents, no tax is withheld provided the intellectual property rights are not utilized within Cyprus. If the rights are used locally, a standard rate of 10% applies, which may be reduced under an applicable Double Tax Treaty.
However, specific exceptions apply to payments made to residents of low-tax or “non-cooperative” jurisdictions included on the EU Blacklist (Annex I):
| Income Type | Withholding Tax Rates | ||
|---|---|---|---|
| EU Blacklisted Jurisdictions | Low-Tax Jurisdictions | All Other Jurisdictions | |
|
Dividends |
17% |
5% |
0% |
|
Interest |
17% |
0% |
0% |
|
Royalties |
10% |
0% / 10% |
0% / 10% |
Special Defence Contribution (SDC) in Cyprus
The Special Defence Contribution (SDC) is levied (withheld) on specific types of Cyprus-sourced income received by tax residents of Cyprus.
| Income Type | SDC rules |
|---|---|
|
Dividends |
The SDC rate on dividends paid to individuals who are tax residents of Cyprus is 5% (applicable to dividends paid out of profits earned on or after 1 January 2026; previously 17%). This contribution is withheld by the payer company. As a general rule, dividends received by Cypriot companies from either local or foreign entities are exempt from SDC. The Deemed Dividend Distribution (DDD) rule has been abolished for profits earned from 2026 onwards. However, it remains in effect for profits generated up to and including the 2025 tax year. Under this rule, if 70% of profits are not distributed within two years following the end of the period in which they were earned, that portion is subject to SDC at a rate of 17% (provided the shareholders are individuals who are both tax residents and domiciled in Cyprus). |
|
Interest |
As a general rule, interest income of Cyprus-resident companies is exempt from SDC as of 2026 (though it remains subject to Corporate Income Tax). Previously, the SDC rate was 17% (and 30% prior to 2024) or 3% for income derived from bonds. |
|
Rental income |
Rental income of Cypriot companies is also exempt from SDC as of 2026 (though it remains subject to Corporate Income Tax). Previously, the SDC rate was 3% levied on 75% of the gross rental income. |
Cyprus’s International Tax Treaty Network
Cyprus has established a robust network of bilateral Double Tax Treaties (DTTs) with more than 70 countries. These agreements provide mechanisms for foreign tax credits, full exemptions, or reduced withholding tax rates on various types of income, and facilitate the mutual exchange of tax information.
| Cyprus’s DTT Partner Countries | |
|---|---|
|
|
In addition to its bilateral treaties, Cyprus is a party to the following international tax instruments and directives:
- The 1988 Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 Protocol.
- The Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA CRS).
- The Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (MCAA CbC).
- The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI).
- EU Directive 2018/822 regarding the mandatory automatic exchange of information in relation to reportable cross-border arrangements (DAC6).
- EU Directive 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the European Union (Pillar Two).
Value Added Tax (VAT) in Cyprus
Scope and Rates
Cypriot VAT applies to the following transactions:
- Taxable Supplies: The supply of goods or services by a taxable person in Cyprus.
- Intra-Community Acquisitions: The acquisition of goods by a Cypriot taxable person from another EU Member State.
- Importation: The import of goods into Cyprus from countries outside the European Union.
The standard VAT rate in Cyprus is 19%.
Reduced rates apply to specific categories of goods and services: 5% rate applies to items such as foodstuffs and pharmaceuticals; 9% rate applies to services such as passenger transport and hotel accommodation. Zero rate may apply to the export of goods and intra-Community supplies. Furthermore, certain financial, educational, and medical services are exempt from VAT.
VAT Registration in Cyprus
A company or sole proprietor must register for VAT (obtain a VAT number) if, at the end of any month, the value of VAT-taxable transactions for the previous 12 months exceeds EUR 15,600 (or if it reaches this threshold within the next 30 days).
A company may register for VAT voluntarily. To do this, the company must prove that it actually carries out or plans to carry out taxable transactions that entitle it to deduct input VAT.
VAT Reporting in Cyprus
Any person or entity registered for VAT is required to submit quarterly VAT returns. The submission of the return and the corresponding tax payment must be completed no later than the 10th day of the second month following the end of the relevant tax period.
In addition to standard VAT returns, businesses registered for VAT that supply goods or services to VAT-registered entities in other EU Member States must also file a monthly VIES (VAT Information Exchange System) return. This return details intra-Community supplies and must be submitted no later than the 15th day of the month following the reporting period.