Cyprus Company | Tax Law

Cyprus Tax Guide

Understanding the Cyprus Tax Framework

Cyprus offers a well-established and internationally aligned tax framework within the European Union. Its legal and regulatory environment, broad double tax treaty network and corporate tax system make Cyprus a widely used jurisdiction for international business, investment holding, trading activities and regional operations. Cyprus enacted significant tax reform measures at the end of 2025, with most key changes effective from 1 January 2026.

The Cyprus tax system is aligned with EU legislation and international tax standards, including rules relating to tax transparency, anti-abuse provisions, transfer pricing and reporting obligations.

This guide provides a high-level overview of the main taxes applicable in Cyprus, including:

• Income Tax;
• Corporate Tax;
• Special Defence Contribution;
• Capital Gains Tax;
• VAT;
• Stamp Duty;
• Social Insurance Contributions;
• Double Tax Treaties.

Tax treatment depends on the specific facts and circumstances of each case. Professional advice should always be obtained before implementing any structure or transaction.

Income Tax in Cyprus

Rates, Exemptions and Key Considerations

Cyprus applies income tax to individuals based on tax residency status. Cyprus tax residents are generally taxed on their worldwide income, while non-residents are generally taxed only on certain income accrued or derived from Cyprus sources.

Cyprus Tax Residents

Individuals who satisfy the Cyprus tax residency conditions are generally subject to Cyprus income tax on their worldwide income.

Non-Residents

Individuals who are not Cyprus tax residents are generally taxed only on Cyprus-source income, subject to applicable exemptions and treaty relief.

Individual Income Tax Rates

As from 1 January 2026, the Cyprus personal income tax bands are as follows:

Taxable Income	Rate
€0 – €22,000	0%
€22,001 – €32,000	20%
€32,001 – €42,000	25%
€42,001 – €72,000	30%
Over €72,000	35%

Common Income Tax Exemptions

Subject to applicable conditions and anti-abuse provisions, exemptions may apply to:

• Dividend income and certain interest income, subject to the Special Defence Contribution rules where relevant;
• Profits from the disposal of qualifying securities;
• Certain foreign permanent establishment profits;
• Qualifying foreign employment income;
• Certain relocation and employment incentives for new Cyprus tax residents.

Foreign permanent establishment profits may be exempt, but from 1 January 2026 the exemption does not apply where the foreign permanent establishment is situated in a jurisdiction included on the EU list of non-cooperative jurisdictions for tax purposes.

The availability of exemptions depends on the taxpayer’s specific circumstances and the legislation in force at the relevant time.

Allowable Deductions

Common deductions may include:

• Social insurance contributions;
• General Healthcare System contributions;
• Approved pension, provident and medical fund contributions;
• Certain life insurance premiums;
• Donations to approved charitable organisations;
• Qualifying employment or business expenses.

For individuals, certain deductions are subject to caps and supporting documentation requirements.

Cyprus Corporate Tax Framework

Cyprus tax resident companies are generally subject to corporation tax on their worldwide taxable profits. As from 1 January 2026, the standard corporate income tax rate in Cyprus is 15%.

A company is tax resident in Cyprus if it is managed and controlled in Cyprus. As from 2026, a Cyprus-incorporated company is also generally considered Cyprus tax resident unless an applicable double tax treaty provides otherwise. Companies that have transferred their registered office or legal seat to Cyprus are treated as incorporated in Cyprus.

In practice, where Cyprus tax residency is based on management and control, the company’s strategic decision-making, board conduct, governance records and operational arrangements should support that effective management and control are exercised in Cyprus and are consistent with the company’s activities.

Cyprus companies involved in international structures should maintain appropriate economic substance, operational activity and governance procedures in line with modern EU and OECD expectations.

Cyprus continues to be used for international trading, holding, financing and investment structures due to its legal framework, EU membership, professional services sector and treaty network.

Deductible Business Expenses

Subject to applicable tax rules, expenses incurred wholly and exclusively for the production of taxable income may generally be deductible. Examples may include:

• Staff costs and employer contributions;
• Interest on qualifying business borrowings;
• Business operating expenses;
• Certain research and development expenditure;
• Professional and administrative expenses.

Interest expenses, foreign affiliate payments and other deductions may be subject to restrictions, including anti-avoidance, transfer pricing, hybrid mismatch and low-tax jurisdiction rules.

Tax Losses

Tax losses may generally be carried forward and set off against taxable profits of the next seven years, subject to applicable conditions. Carry-back of losses is not generally permitted. Group relief may also be available between qualifying Cyprus tax-resident group companies.

Intellectual Property Regime

Cyprus provides a preferential tax regime for qualifying intellectual property income.

Subject to applicable nexus and substance requirements, qualifying IP income may benefit from an 80% deemed deduction. The regime follows the OECD modified nexus approach and applies to qualifying IP such as patents, copyrighted software and certain other eligible IP assets. Marketing-related IP, such as trademarks, does not qualify.

Notional Interest Deduction

A Notional Interest Deduction may be available on qualifying new equity introduced into a Cyprus tax-resident company, subject to applicable conditions and limitations. The deduction cannot exceed 80% of the taxable profit generated by the activities financed by the new equity.

Corporate Tax Exemptions

Subject to conditions, exemptions may apply to:

• Dividend income;
• Profits from the disposal of qualifying securities;
• Certain foreign permanent establishment profits.

International structures involving Cyprus entities should be supported by appropriate governance, transfer pricing compliance, commercial rationale and economic substance. Related-party transactions should comply with Cyprus transfer pricing legislation and the arm’s length principle in accordance with OECD guidelines.

Special Defence Contribution and the Cyprus Non-Dom Framework

Special Defence Contribution, commonly referred to as SDC, is a Cyprus tax applicable to certain categories of passive income.

For individuals, SDC generally applies only where the individual is both Cyprus tax resident and Cyprus domiciled for SDC purposes. SDC may apply to dividend and interest income, subject to exemptions, transitional provisions and anti-abuse rules. Non-tax residents and Cyprus tax-resident non-domiciled individuals are generally exempt from SDC.

As from 2026, important changes apply to the SDC framework:

• Rental income is no longer subject to SDC and is instead taxed under the income tax or corporation tax rules, as applicable;
• Companies’ interest income is generally subject to corporation tax and exempt from SDC;
• Deemed dividend distribution rules have been abolished for profits generated after 31 December 2025, subject to transitional provisions for earlier profits;
• The SDC rate on dividends relating to profits from tax years as from 2026 is generally reduced to 5%, subject to the detailed rules and transitional provisions.

Cyprus Non-Dom Regime

Individuals who qualify as Cyprus tax residents but are not considered domiciled in Cyprus for SDC purposes may benefit from exemptions from SDC on qualifying dividend and interest income. The non-dom exemption does not automatically exempt an individual from other Cyprus taxes or contributions, including possible General Healthcare System contributions.

The application of the non-dom regime depends on the individual’s domicile status, tax residency history and wider circumstances. Professional advice should be obtained before relying on the regime.

Capital Gains Tax in Cyprus

Cyprus Capital Gains Tax generally applies to gains from:

• The disposal of immovable property situated in Cyprus;
• The disposal of shares in companies that directly own Cyprus-situated immovable property;
• The disposal of shares in companies that indirectly own Cyprus-situated immovable property, where the relevant value threshold is met.

The standard Cyprus Capital Gains Tax rate is 20%. From 1 January 2026, the threshold for indirect disposals involving Cyprus immovable property is reduced from 50% to 20% of the market value of the shares deriving from Cyprus-situated immovable property.

Common CGT Exemptions

Subject to conditions, exemptions may apply to:

• Transfers on death;
• Certain gifts between relatives;
• Gifts to qualifying family companies or charities;
• Qualifying corporate reorganisations;
• Disposal of certain listed securities, subject to the updated rules for regulated markets and applicable grandfathering provisions.

The 2026 reforms also updated the treatment of listed securities for Capital Gains Tax purposes, including a shift from the previous “recognised stock exchange” wording to a “regulated stock exchange” framework, with grandfathering rules for certain pre-2026 holdings.

Lifetime Exemptions

Individuals may be entitled to lifetime exemptions against taxable capital gains. As from 1 January 2026, the main lifetime exemptions are:

Capital gain arising from	Exemption
Disposal of private principal residence, subject to conditions	€150,000
Disposal of agricultural land by a farmer	€50,000
Any other disposal	€30,000

The above exemptions are subject to an overall lifetime maximum of €150,000.

Cyprus VAT System

Cyprus VAT legislation follows the EU VAT framework and applies to the supply of goods and services in Cyprus, the acquisition of goods from the European Union and the importation of goods into Cyprus.

The standard VAT rate in Cyprus is 19%. Cyprus also applies reduced VAT rates of 9%, 5% and 3%, as well as a zero rate for certain supplies.

VAT Rates

VAT Rate	Typical Application
0%	Certain exports and international supplies
3%	Certain cultural goods and services, waste-related services and other specific supplies
5%	Certain foodstuffs, pharmaceutical products, qualifying residential property rules and other eligible supplies
9%	Accommodation, restaurant and catering services, and certain passenger transport services
19%	Standard taxable supplies

Businesses operating internationally often need to consider additional VAT obligations relating to intra-Community transactions, imports, exports, electronic services, reverse charge rules and cross-border invoicing requirements.

VAT Registration

Businesses are generally required to register for VAT where taxable turnover exceeds the applicable registration threshold. VAT registration is compulsory where turnover exceeds €15,600 during the preceding 12 months or is expected to exceed €15,600 within the next 30 days.

VAT registration may also be required in other cases, including certain intra-Community acquisitions, intra-Community supplies and reverse-charge transactions. No registration threshold applies for certain intra-Community supplies of goods and services.

VAT obligations may include:

• VAT returns;
• VIES reporting;
• Intrastat reporting;
• Proper invoicing procedures;
• Record-keeping requirements.

Applicable thresholds and filing obligations should always be confirmed based on current legislation and the nature of the business activities.

Stamp Duty in Cyprus

Stamp duty has been abolished in Cyprus with effect from 1 January 2026 for documents executed on or after that date.

For documents executed up to 31 December 2025, the previous stamp duty rules may still be relevant. Under the pre-2026 regime, Cyprus stamp duty generally applied to written instruments relating to assets located in Cyprus or matters taking place in Cyprus, subject to applicable rates and exemptions.

Professional advice should be obtained where a document was executed before 1 January 2026 or where transitional issues may arise.

Cyprus Shipping and Ship Management

Cyprus is an established shipping and ship management jurisdiction operating a tonnage tax system. Subject to qualifying conditions, shipowners, charterers and ship managers may benefit from tonnage tax treatment and exemptions on qualifying shipping income.

The Cyprus shipping regime is commonly used by shipowners, charterers and ship managers seeking an EU-based operational platform with access to maritime, legal, tax and corporate administration support services.

Subject to qualifying conditions, shipping companies and ship managers may benefit from:

• Tonnage tax treatment;
• Exemptions on qualifying shipping income;
• Exemptions on qualifying dividend income.

The availability of the regime depends on compliance with operational, regulatory and substance requirements.

Cyprus Double Tax Treaty Network

Cyprus maintains an extensive network of double tax treaties covering jurisdictions across Europe, the Middle East, Asia and other international markets. The Cyprus Ministry of Finance publishes the official treaty list, which includes 71 treaty entries, including Vietnam with entry into force shown as 1^st June 2026.

Double tax treaties are an important component of Cyprus’s international tax framework and can help facilitate cross-border investment and commercial activity. They may reduce double taxation, provide foreign tax credit mechanisms and improve certainty for international businesses operating across multiple jurisdictions.

Cyprus domestic law also generally does not impose withholding tax on dividends, interest and most royalties paid to non-residents, subject to specific exceptions. These exceptions include certain payments to companies in EU non-cooperative jurisdictions, dividend payments to related companies in low-tax jurisdictions, and royalties relating to rights used within Cyprus.

Double tax treaties may:

• Reduce or eliminate foreign withholding taxes;
• Provide foreign tax credit mechanisms;
• Allocate taxing rights between jurisdictions;
• Support cross-border investment structures.

The application of treaty benefits depends on:

• Tax residency;
• Beneficial ownership;
• Economic substance;
• Anti-abuse provisions;
• Commercial rationale;
• The terms of the relevant treaty.

Detailed treaty analysis should always be performed before implementing any international structure.

Social Insurance and Employer Obligations

Employer Compliance in Cyprus

Employers operating in Cyprus are required to comply with payroll, tax and social insurance obligations. Proper payroll administration is an important part of maintaining operational compliance and ensuring that employee-related reporting obligations are fulfilled correctly and on time.

For 2026, the employee and employer social insurance contribution rate is 8.8% of gross remuneration, subject to the applicable annual insurable earnings cap. General Healthcare System contributions also apply, subject to the relevant income cap and contribution category.

Employers operating in Cyprus are generally required to:

• Register with the Social Insurance Department;
• Deduct PAYE income tax where applicable;
• Remit social insurance contributions;
• Account for General Healthcare System contributions;
• Maintain payroll records;
• Submit periodic employer filings.

Contribution rates, caps and filing requirements are subject to periodic legislative updates. Professional payroll and compliance support is recommended to ensure ongoing compliance.

Governance, Substance and International Compliance

International tax and regulatory standards have evolved significantly in recent years. Cyprus companies involved in international structures are expected to demonstrate appropriate compliance with international transparency and reporting standards, including AML/KYC obligations, beneficial ownership disclosure requirements, CRS reporting obligations and DAC6 reporting requirements where applicable.

Companies involved in international structures should also demonstrate appropriate:

• Economic substance;
• Corporate governance;
• Management and control;
• Transfer pricing compliance;
• Beneficial ownership transparency;
• AML/KYC compliance.

This is particularly important where companies seek to rely on:

• Tax treaty benefits;
• EU directives;
• Cross-border financing arrangements;
• Holding company structures;
• Preferential tax regimes.

Appropriate operational substance and governance help support long-term regulatory stability and international credibility.

How FBS Cyprus Supports Clients

FBS Cyprus provides coordinated support across:

• Company incorporation;
• Tax registrations;
• VAT compliance;
• Accounting and bookkeeping;
• Corporate administration;
• Payroll and social insurance;
• International tax coordination;
• Governance and compliance support.

Our objective is to help clients establish and maintain Cyprus structures that are commercially practical, operationally efficient and aligned with current regulatory standards.

Important Disclaimer

The information contained in this guide is provided for general informational purposes only and does not constitute tax, legal, accounting or financial advice.

Tax treatment depends on the specific facts and circumstances of each client and may change due to legislative, regulatory or administrative developments.

Nothing in this guide should be interpreted as promoting tax avoidance arrangements or structures lacking appropriate commercial rationale or economic substance.

Professional advice should always be obtained before acting on any information contained in this guide.

Frequently Asked Questions

Answers to common questions about Cyprus company tax law, corporate tax, VAT, tax residency, substance, double tax treaties, and ongoing compliance.

What is the Cyprus corporate tax framework?

Cyprus has an EU-aligned corporate tax framework that applies to Cyprus tax-resident companies and supports international business, holding, trading, financing, and investment structures where the company has appropriate governance, commercial rationale, and compliance arrangements.

When is a company considered tax resident in Cyprus?

A company is generally considered Cyprus tax resident where its management and control are exercised in Cyprus. From 2026, Cyprus-incorporated companies may also be treated as Cyprus tax resident unless an applicable double tax treaty provides otherwise.

What is the Cyprus corporate tax rate?

As from 1 January 2026, the standard corporate income tax rate in Cyprus is 15%. The actual tax treatment of a company depends on its activities, income, expenses, exemptions, deductions, and the applicable rules at the relevant time.

Are business expenses deductible for Cyprus companies?

Business expenses may generally be deductible where they are incurred wholly and exclusively for the production of taxable income. Certain deductions may be restricted by anti-avoidance rules, transfer pricing rules, interest limitation rules, hybrid mismatch rules, or other specific provisions.

Does a Cyprus company need VAT registration?

VAT registration depends on the company’s activities, turnover, and transaction profile. Registration may be required where taxable turnover exceeds the applicable threshold or where specific cross-border, intra-Community, or reverse-charge obligations arise.

Can Cyprus tax treaties reduce double taxation?

Cyprus maintains a broad double tax treaty network that may help reduce double taxation and improve certainty for cross-border income flows. Treaty access depends on tax residency, beneficial ownership, substance, commercial rationale, anti-abuse rules, and the wording of the relevant treaty.

Why are substance and governance important for Cyprus companies?

Substance and governance are important because tax authorities, banks, auditors, and counterparties may review management and control, board decision-making, operational activity, transfer pricing, beneficial ownership transparency, AML/KYC compliance, and the commercial rationale of the structure.

Do I need professional advice before relying on Cyprus tax rules?

Yes. Cyprus tax treatment depends on the company’s specific facts, activities, ownership, income flows, jurisdictions involved, and current legislation. Professional tax, legal, accounting, and compliance advice should be obtained before implementing any structure or transaction.

Contact our team to initiate the Cyprus Company Formation and start reaping the full benefits of an onshore, low-tax, EU jurisdiction. Simply fill in the contact box below or contact us by email on [email protected]