Cyprus Corporate Tax Rate 2026: 15% Is Now in Force — What Changed and What Stays the Same

Cyprus corporate tax is now 15%. The rate came into force on 1 January 2026 under an amendment to the Income Tax Law aligned with the OECD Pillar Two framework. If you have read that Cyprus charges 12.5% corporation tax, that information is out of date — the 12.5% rate expired on 31 December 2025.

This article gives you the full picture: what changed, what stayed the same, and whether Cyprus still makes sense as a holding or operating base for international businesses. If you are an existing Cyprus company owner or are evaluating Cyprus company formation, the numbers below are what you need to plan for.

From 12.5% to 15%: The Change, the Timeline, and Who It Affects

Cyprus had held a 12.5% corporate income tax rate since 2003 — one of the lowest headline rates in the EU for over two decades. That rate is gone.

The amendment to the Income Tax Law was enacted to bring Cyprus into compliance with the OECD Pillar Two global minimum tax rules, which require large multinational groups to pay at least 15% effective tax in each jurisdiction where they operate. The new 15% flat rate applies to all Cyprus tax-resident companies on taxable profits, effective for financial years beginning on or after 1 January 2026.

In practical terms:

• Financial year 2025 and earlier: 12.5% rate applies.
• Financial year 2026 onwards: 15% rate applies.
• There is no grandfathering for existing companies. All Cyprus-resident entities are subject to the new rate from 2026.

The taxable base itself — net profit after allowable deductions — has not changed. What changed is the percentage applied to it.

The Full Scope of the 2026 Cyprus Tax Reform

The rate increase was not the only change that came with the 2026 reform. Several other adjustments were made simultaneously, some of which work in taxpayers’ favour.

Loss Carry-Forward Extended to 7 Years

Prior to the reform, tax losses could be carried forward for 5 years. This has been extended to 7 years from the 2026 tax year. For companies with cyclical revenues or significant start-up losses, this is a meaningful improvement that partially offsets the rate increase.

SDC on Dividends Cut for Domiciled Residents

The Special Defence Contribution (SDC) — a levy applied only to Cyprus-domiciled tax residents — has been reduced. From 1 January 2026, the SDC rate on dividend income for domiciled residents drops from 17% to 5%. This makes Cyprus materially more attractive for founders who are domiciled in Cyprus and wish to extract profits as dividends rather than salary.

It is worth noting that non-domiciled residents — those using the Cyprus non-dom regime — remain completely exempt from SDC on dividends and interest. The non-dom regime is unchanged.

Notional Interest Deduction (NID) Retained

The NID mechanism allows companies to claim a notional deduction on new equity injected into the business, calculated at a reference rate set annually by the tax authorities. This effectively reduces the taxable base for equity-funded companies and has not been removed in the 2026 reform. Companies with clean capital structures can still use NID to reduce their effective tax rate below the 15% headline.

Annual Levy Abolished (2024)

One cost that is no longer on the table: the annual €350 company levy was abolished from 2024. This is not a 2026 change, but it is worth stating clearly because older guides still list it as an ongoing cost. It no longer exists.

What Did Not Change: Cyprus’s Core Tax Advantages

For all the attention paid to the rate increase, the features that made Cyprus attractive to holding structures and international entrepreneurs remain fully intact.

IP Box: Approximately 2.5% Effective Rate on IP Income

The Cyprus IP Box regime exempts 80% of net qualifying IP income from corporation tax. At the new 15% headline rate, the effective tax on IP income works out to approximately 2.5% — still among the lowest in the EU. Qualifying assets include patents, software copyright, and other IP developed or acquired under the modified nexus approach. Companies deriving significant revenues from IP should model this carefully; the absolute rate increase from 12.5% to 15% has only a marginal effect on IP Box companies.

No Withholding Tax on Outbound Payments

Cyprus imposes zero withholding tax on outbound dividends, interest, and royalties paid to non-residents, provided the recipient is not in a blacklisted jurisdiction. This applies regardless of whether a tax treaty is in place and regardless of the percentage shareholding of the recipient. For group structures routing income through Cyprus, this remains a decisive advantage over many EU jurisdictions that impose 15–25% withholding tax on outbound payments.

Capital Gains Exemption on Securities

Gains on the disposal of shares and other securities are fully exempt from capital gains tax in Cyprus (with one exception: companies owning Cyprus-situated immovable property). This makes Cyprus a natural holding company jurisdiction for investment in subsidiaries, private equity, and venture portfolios. The exemption is broad and has not been narrowed in the 2026 reform.

Non-Dom Regime: 0% on Dividends and Interest

The non-dom regime remains one of Cyprus’s most powerful personal tax tools. Individuals who qualify as Cyprus tax residents but are not domiciled in Cyprus pay zero SDC on dividends and interest for up to 17 years — extendable by 5+5 additional years at €250,000 per year as a lump sum payment.

Qualifying as a Cyprus tax resident under the 60-day rule requires spending at least 60 days in Cyprus in the tax year, less than 183 days in any single other country, and not being tax resident elsewhere. No long-term relocation is required. Our team handles non-dom applications regularly — see our Cyprus non-dom status service for the full process.

Personal Income Tax Bands (2026)

For business owners taking a salary, the personal income tax scale for 2026 is:

GESY (National Health System) contributions are 2.65% for employees and 2.90% for employers, capped at a salary of €180,000. Our Cyprus payroll service handles the full calculation and filing.

Double Tax Treaties: 65+ Countries

Cyprus has an extensive network of double tax treaties covering over 65 countries, including major trading partners across Europe, Asia, and the Middle East. This network remains in full force and is unaffected by the 2026 reform.

Is Cyprus Still Competitive at 15%?

The straightforward answer is yes — but the nature of the competitiveness has shifted slightly. Cyprus no longer wins purely on headline rate. At 15%, it sits at the OECD minimum floor, on par with Ireland. What it offers beyond the rate is where the real comparison lies.

The combination of 0% withholding tax, a capital gains exemption on securities, a functional IP Box at ~2.5%, the non-dom personal tax regime, and English common law company structure (Companies Law, Cap. 113) is not replicated by any of the larger EU jurisdictions above. For holding companies, IP-driven businesses, and internationally mobile founders, Cyprus remains among the most efficient EU jurisdictions when total effective burden — not just the headline corporate rate — is modelled.

Ireland’s 12.5% rate applies only to trading income; passive income is taxed at 25%. Its CGT on share disposals is 33%. Cyprus at 15% with no CGT on shares and no withholding tax will still produce a lower total tax cost for most holding and mixed-use structures.

What This Means for Existing Cyprus Companies

If you already own a Cyprus company, the practical implications depend on your structure.

Operating companies (trading profits): Your effective rate increases by 2.5 percentage points for financial years from 2026. For a company with €500,000 taxable profit, this means an additional €12,500 in tax per year. Model this against your current structure and confirm your provisional tax payments with your accountant — Cyprus requires provisional tax payments in two instalments (July and December).

Holding companies (dividend and capital gains income): The impact is minimal to zero. Dividend income from subsidiaries typically qualifies for the participation exemption (0% tax in Cyprus). Capital gains on share disposals remain exempt. The rate change primarily affects companies with direct trading profits.

IP holding companies: The IP Box effective rate moves from approximately 2.5% (80% exemption at 12.5%) to approximately 2.5% (80% exemption at 15% — the 80% exemption means you are taxed on 20% of net IP income at 15%, i.e., 3% effective rate). This is a marginal change and Cyprus remains highly competitive for IP holding.

Mandatory audit: All Cyprus companies — regardless of size — are required to have their financial statements audited annually. This is a local regulatory requirement that differs from many EU countries where small companies are audit-exempt. If you are not yet working with a registered Cyprus auditor, factor this into your annual cost base. Our Cyprus accounting services team can handle both accounting and audit coordination.

For VAT-registered businesses, the standard VAT rate remains 19% (9% reduced rate for hospitality and pharma). The VAT registration threshold is €15,600 annual turnover. See our Cyprus VAT services page for registration and compliance support.

If you are considering whether to restructure or set up a new entity in light of the changes, our team in Limassol is available to walk through the numbers. Contact us to arrange a consultation.

Frequently Asked Questions

Is the Cyprus corporate tax rate 12.5% still valid in 2026?

No. The 12.5% rate expired on 31 December 2025. From 1 January 2026, all Cyprus tax-resident companies pay corporation tax at 15% on taxable profits. The 12.5% rate applied to financial years ending on or before 31 December 2025.

Does the 15% rate apply to all companies, or only large multinationals?

The 15% rate applies to all Cyprus tax-resident companies, regardless of size. The OECD Pillar Two rules that triggered the change technically target groups with over €750 million consolidated revenue, but Cyprus implemented the domestic top-up tax at the general level, so the new headline rate is 15% for all entities.

Is Cyprus still worth it for a holding company at 15%?

For most holding structures, yes. Dividend income from qualifying subsidiaries is typically exempt under the participation exemption. Capital gains on share disposals are exempt. There is no withholding tax on dividends paid out of Cyprus. The effective tax for a pure holding structure is often close to zero regardless of the headline rate change.

What is the effective tax rate on IP income in Cyprus in 2026?

The IP Box regime exempts 80% of net qualifying IP income. At the 15% headline rate, the effective tax rate on IP income is approximately 3% (20% of net IP income taxed at 15%). This remains one of the lowest IP tax rates in the EU.

Has the non-dom regime been affected by the 2026 reform?

The non-dom exemption from SDC on dividends and interest is unchanged. Non-dom residents still pay 0% SDC on dividend and interest income for up to 17 years. The change to SDC (from 17% to 5%) affects only Cyprus-domiciled residents, not non-doms. The 60-day residency qualification rule is also unchanged.

Can I still set up a Cyprus company remotely in 2026?

Yes. Cyprus company formation is fully possible remotely via a power of attorney. No in-person visit to Cyprus is required. Formation typically takes 5–10 working days from submission to the Cyprus Registrar of Companies. There is no statutory minimum share capital requirement, though €1,000 paid-up share capital is conventional. See our Cyprus company formation service for the full process.

Do I need an audit for my Cyprus company even if it is small?

Yes. Cyprus law requires a statutory audit for all Cyprus-registered companies, regardless of size or turnover. This is stricter than most EU countries, where small companies are audit-exempt. Budget for annual audit fees as part of your Cyprus compliance cost. Our accounting team can assist with both bookkeeping and audit preparation.