Corporate Tax
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Basis of taxation for companies
A Cyprus tax resident company is taxed on taxable income arising from sources within and outside Cyprus. A non-resident company is taxed only on taxable income sourced in Cyprus.
Corporate tax residence generally follows the management and control principle. In addition, Cyprus applies an incorporation-based rule: company incorporated under Cyprus law is considered Cyprus tax resident regardless whether it is tax resident in another jurisdiction (double tax treaties provisions apply). The 2026 package further clarified and reinforced aspects of this incorporation approach.
Tax rate
The Corporate Income Tax (CIT) rate is 15% for tax periods from 1 January 2026.
Cyprus maintains core exemptions that remain central to many international structures, including:
- Dividend income (subject to conditions / anti-avoidance).
- Profit from disposal of “securities” (as defined under Cyprus tax practice).
- Foreign permanent establishment (PE) profits (subject to conditions; reform introduces limitations for PEs in EU non-cooperative jurisdictions).
The term “Securities” includes shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon.
As per a Circular issued by the competent Tax Authorities, the term further includes amongst others, options on Securities, short positions on Securities, futures/ forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRs, GDRs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Repos on Securities, units in open-end or close-end collective investment schemes.
General rule: Expenses incurred wholly and exclusively for producing taxable income are deductible, supported by appropriate documentation.
Key items:
- Tax losses: carry-forward extended from 5 to 7 years (from 2026 – applicable to losses from previous years if they fall within the 7 year limit).
- Stamp Duty: The Cyprus stamp duty regime was abolished from 1 January 2026, removing transaction costs on many corporate and financing documents.
- Group relief: remains available subject to group conditions; reform clarifies order of utilisation (own losses before group relief).
- Notional Interest Deduction (NID): deduction on qualifying new equity, subject to an 80% cap on taxable profit from the relevant activity/assets. The NID is calculated using a reference interest rate and is limited so that the deduction does not exceed 80% of taxable profit arising from the activity funded by the new equity.
- IP Box: Cyprus’ OECD nexus-based regime provides an 80% deduction on qualifying IP profits (best suited to IP/R&D-led models with clean tracking and documentation).
- R&D super-deduction: an additional 20% deduction (i.e., 120% total) for qualifying R&D expenditure for tax years 2025–2030, with clarified interaction rules.
- Entertainment expenses: ceiling increased to €30,000 (from €17,086), or 1% of company’s revenue, whichever is lower.
- Interest taxation clarity: interest earned by companies is treated under the Income Tax Law (CIT) and is exempt from SDC, while interest accruing to individuals is under SDC (see SDC section).
Cyprus retains its generally attractive treatment of outbound flows, while applying targeted measures for specific counterparties/jurisdictions:
- Withholding tax on dividends to low-tax jurisdictions reduced to 5%, while it remains 17% for blacklisted jurisdictions (as per the reform package).
- Low tax jurisdictions designation clarified as jurisdictions that have corporate tax rates lower than 50% of the respective corporate tax rate in Cyprus.
- Payments of interest/royalties to associated companies in low-tax jurisdictions are impacted through the reform’s defensive framework (including restrictions such as non-deductibility in defined cases).
Transactions in Crypto assets
The reform introduced a special flat tax framework for gains arising from crypto asset transactions:
- 8% flat tax rate on any profits arising from the disposal of crypto assets net of same year crypto asset disposal losses. The 8% tax rate is not applicable to gains arising from crypto assets mining, which are taxed at the normal CIT rate.
| Asset category | Allowance % (per annum) |
Plant & machinery (general) | 10% |
Furniture & fittings | 10% |
| Commercial buildings | 3% |
| Industrial / agricultural / hotel buildings | 4% |
| Commercial motor vehicles | 20% |
| Computer hardware & operating systems | 20% |
| Application software | 33⅓%* |
* Low-value application software may be written off in the year of acquisition (subject to the relevant conditions/threshold).
Note:
Cyprus provides additional rates for specialised assets (e.g., certain agricultural equipment, vessels/aircraft, renewable energy and other categories). The above table is a snapshot of the most commonly encountered allowances.
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FAQs for Corporate Tax
From 1 January 2026, Cyprus corporate income tax is 15%.
Tax residency is primarily determined by management and control in Cyprus. Cyprus also applies an incorporation-based residency concept in defined cases (e.g., where double tax treaties do not provide a separate residency determination requirement).
Dividend income is generally exempt from corporate income tax, subject to conditions and anti-avoidance rules (e.g., where the paying company has predominantly passive income and low effective taxation).
Gains from disposal of “securities” (including shares) are generally exempt from corporate income tax (CGT may apply only in specific Cyprus real-estate related cases - see CGT section).
From 2026, losses can generally be carried forward for 7 years (previously 5). Applicable from year 2020 losses and onwards.
NID allows a tax deduction on qualifying new equity (subject to conditions and limitations), often used to reduce the effective tax burden where a Cyprus company is equity-funded and has genuine taxable activity.
The Cyprus IP Box provides an 80% deduction on qualifying IP profits calculated under the OECD nexus approach - meaning the benefit is strongest where the company has real R&D substance and auditable tracking.
Yes - stamp duty was abolished from 1 January 2026.