In short
- Dividends received are exempt, unless the payer is a passive company taxed below 7.5% abroad.
- Gains on shares are exempt. The exception is a company whose value comes from real estate in Cyprus.
- Dividends paid abroad: 0% withholding tax, 5% to an associated company in a listed low-tax jurisdiction.
- Setup: €175 of state fees inside packages from €1,699. Each year: accounts, an audit, a €20 return.
In this guide
What a Cyprus holding company is and how it is taxed in 2026
Cyprus law has no separate legal form called a holding company. It is a private company limited by shares, registered under the Companies Law, Cap. 113, whose business is to own shares in other companies, finance them and collect their dividends. It needs no licence for that. The tax rules that make it useful are in the Income Tax Law, and they apply to every Cyprus company that holds shares.
| Income or payment | Cyprus tax in 2026 |
|---|---|
| Dividends received from subsidiaries | Exempt from corporate tax. 5% defence contribution where both tests of the next section are met |
| Gain on the sale of shares | Exempt |
| Interest received, for example on loans to subsidiaries | 15% corporate tax on the profit |
| Royalties and fees for services | 15% corporate tax on the profit |
| Dividends paid to shareholders abroad | No withholding tax, with two exceptions |
| Interest paid abroad | No withholding tax, except to a jurisdiction on the EU list of non-cooperative jurisdictions |
The company itself is formed like any other: the packages and the prices are on our page about company formation in Cyprus.
Dividends a holding company receives: the participation exemption and when it does not apply
A dividend from a company abroad is exempt from corporate tax, unless the paying company deducted it from its own taxable profit. A dividend of that kind is taxed as ordinary income at 15%.
The Special Defence Contribution (SDC) applies to a foreign dividend where two tests are met together. First, more than 50% of the paying company's activities lead, directly or indirectly, to investment income. Second, its income is taxed abroad at an effective rate below 7.5%, the threshold from 2026. The contribution is then 5%, and tax withheld abroad on the dividend is credited against it.
A trading subsidiary keeps the exemption whatever its tax rate. A passive subsidiary keeps it when its income is taxed at 7.5% or more. Until 31 December 2025 the threshold was 6.25% and the contribution 17%.
A dividend from another Cyprus company is exempt too. One transitional rule remains: a dividend received in 2026 out of profits of 2024 or 2025, or in 2027 out of profits of 2025, bears 17% SDC. The rule does not apply to the extent that the receiving company is owned, directly or indirectly, by non-residents or by non-dom residents of Cyprus.
Withholding tax on dividends, interest and royalties paid out of Cyprus
Cyprus withholds no tax on dividends, interest and royalties paid to non-residents, except in the cases the table lists.
| Payment | Withholding tax | When |
|---|---|---|
| Dividend | 5% | Paid to an associated company in one of the 11 low-tax jurisdictions that the Tax Department lists for 2026 |
| Dividend | 17% | Paid to a company in a jurisdiction on the EU list |
| Interest | 17% | Paid to a company in a jurisdiction on that EU list |
| Royalties | 10% | Paid to a company in a jurisdiction on that EU list, or for rights used in Cyprus |
An owner who lives in Cyprus is taxed as a person. A resident who is domiciled in Cyprus pays 5% SDC on dividends from 2026 profits, a non-dom resident pays none, and both pay 2.65% to GeSY, the health system. The guide on dividends in Cyprus works through the distribution itself.
Profits can also stay in the company. The deemed dividend distribution, which taxed 70% of undistributed profit after two years where the owners were resident and domiciled, was abolished for profits from 2026.
Worked example: one year of a Cyprus holding company
A holding company owns two trading subsidiaries abroad and is owned by a founder who lives outside Cyprus. In 2026 it has four transactions.
| Transaction in 2026 | Amount | Cyprus tax |
|---|---|---|
| Dividend from the first subsidiary | €500,000 | €0, exempt |
| Gain on the sale of 30% of the second subsidiary | €1,200,000 | €0, exempt |
| Interest on a loan to the first subsidiary | €40,000 | €6,000, corporate tax at 15% |
| Dividend paid to the founder abroad | €1,000,000 | €0, no withholding tax |
On income of €1,740,000 the company pays €6,000, before the costs it can deduct from the interest. The countries of the subsidiaries and of the founder apply their own taxes to the same payments, and the treaty between each of them and Cyprus sets the limits.
We do this for you Company formation in Cyprus from €1,699
Financing subsidiaries: interest, new equity and losses
- Interest on a loan taken to buy 100% of the shares of a subsidiary that trades, directly or indirectly, is deductible, where the shares were bought on or after 1 January 2012.
- Interest that finances other assets producing exempt income is not deductible in the first seven years of owning them.
- Net borrowing costs are deductible up to 30% of taxable profit before interest, tax, depreciation and amortisation. The first €3 million a year is outside the limit.
- New equity paid into the company since 2015 earns a notional interest deduction. The reference rate is the 10-year government bond yield of the country where the money is used, plus 5 points. For money used in Cyprus in 2026 that is 8.049%. The deduction cannot exceed 80% of the taxable profit the new equity produces.
- A tax loss is carried forward for seven years. A company that holds 75% or more of the voting shares of another Cyprus company can surrender a tax loss to it or receive one from it.
Loans and services between the holding company and its subsidiaries are priced as between independent parties. We prepare the tax return with these deductions as part of tax services in Cyprus.
Tax residence, treaties and substance
From 1 January 2026 a company incorporated in Cyprus is tax resident there by default, unless a double tax treaty provides otherwise. The older test, where control and management are exercised, still decides for companies formed abroad. Directors who take the decisions in Cyprus and board meetings held there remain the usual evidence of where a company is run.
Cyprus has double tax agreements with more than 65 countries, and inside the EU the Parent-Subsidiary Directive removes withholding tax on dividends between qualifying companies. To claim a treaty rate abroad, the company shows a tax residency certificate (TRC). It applies on form T.D.98, pays €80, and the Tax Department issues the certificate for a country that has an agreement with Cyprus.
Groups with revenue of €750 million or more fall under the minimum tax of 15%, which is computed for the group and can add tax on low-taxed income.
How to set up a holding company in Cyprus
- Approve the name with the Registrar of Companies. The fee is €10 for each name.
- Draft the memorandum and articles. The objects name the holding of shares and the financing of group companies.
- Appoint the officers and the office: one director or more, a secretary, and a registered office in Cyprus. The law sets no rule on where a director lives.
- File forms HE1, HE2 and HE3 through a lawyer. The incorporation fee is €165, and registration is expected in 8 to 12 working days.
- Register in the Tax Registry within 60 days of incorporation, through the Tax For All portal with CY Login.
- Enter each beneficial owner (UBO) in the Registrar's register within 90 days of incorporation.
- Open a bank or payment account, and transfer the shares of the subsidiaries to the new company.
The guide on how to register a company in Cyprus explains each filing. VAT registration follows taxable sales, so it becomes a question once the holding company charges its subsidiaries for services such as management.
What a Cyprus holding company costs to set up and to run
The Cyprus company formation cost is the same for a holding company: our formation packages cost €1,699, €2,749 and €4,999 before VAT. Each includes the €175 of state fees, the registered office and the secretary for the first year, and the tax number. From the second year four costs repeat: the office and the secretary, accounting from €290 a month, the audit, and €20 for the annual return. The annual levy of €350 ended in 2024.
Every Cyprus company has its yearly accounts audited by a licensed auditor. A company with turnover under €300,000 and assets under €500,000 for two years running takes a review, a lighter engagement, for financial years that begin on or after 6 February 2026.
To start, choose a package and ask for a quote for your structure: setting up a company in Cyprus.
