Cyprus Corporate Tax 2026: What Changed

Cyprus corporate tax increased to 15% on 1 January 2026, aligning with the OECD Pillar Two global minimum tax framework. For most business owners and entrepreneurs, the headline rate is the main change. The structural advantages of a Cyprus company remain fully intact.

The Rate and What It Covers

The 15% rate applies to the worldwide profits of a Cyprus tax-resident company. A company is Cyprus tax-resident if it is managed and controlled from Cyprus. This means the majority of directors must be Cyprus-based and key strategic decisions made here. At 15%, Cyprus still has one of the lowest corporate tax rates in the EU.

The IP Box Regime

Cyprus's IP box regime allows qualifying intellectual property income to be taxed at an effective rate of 3%. Qualifying IP profits are subject to an 80% deduction, so only 20% of the income is taxed at the 15% corporate rate. The regime applies to patents, copyrights, software, and other qualifying intangible assets. There must be a genuine R&D connection to Cyprus-based activity. Pure IP parking without Cyprus development does not qualify.

Dividends and Capital Gains

• Dividends received by a Cyprus holding company from subsidiaries are generally exempt from corporate tax under the participation exemption
• Profits on disposal of company shares are exempt from Cyprus corporate tax in most cases
• Non-dom shareholders pay 0% Special Defence Contribution on dividends received from a Cyprus company
• No withholding tax on dividends paid by Cyprus companies to non-resident shareholders in most treaty situations

Substance Requirement

For Cyprus tax residency and to access treaty benefits and the IP box, the company must demonstrate genuine substance in Cyprus. This means active local directors, real board meetings in Cyprus, and banking and accounting maintained here. A postal address alone is not sufficient and will not withstand scrutiny.