In short
- A dividend from a US subsidiary is exempt in Cyprus. A 5% contribution applies only when more than 50% of the payer's activities give investment income and its tax is less than half the Cyprus burden.
- Cyprus withholds no tax on a dividend paid to a US owner. The United States is not on the Tax Department's 2026 low-tax list.
- The Tax Department's residence form asks whether the board meets, keeps its minutes and its books, and signs contracts in Cyprus.
- The owners are confirmed in the register of beneficial owners each autumn. The 2026 window runs to 31 December.
In this guide
A US company with a Cyprus holding company: two structures and the Cyprus rules for each
In the first structure the Cyprus company owns the US subsidiary or LLC and receives its dividends. In the second a US owner, a person or a company, owns the Cyprus company, which pays the dividends. This guide gives the Cyprus rules for both and leaves the general rules of a holding company to how to set up a holding company in Cyprus. We form the company and file its returns: company formation in Cyprus.
Dividends from a US subsidiary: exempt in Cyprus, with one 5% test
A dividend that a Cyprus company receives from a company abroad is exempt from corporate tax under Article 8(20) of the Income Tax Law, with no minimum holding and no holding period. The exemption falls away to the extent that the payer deducted the dividend when it computed its own tax.
The Special Defence Contribution (SDC) adds a test. Under Article 3(1)(c) of the SDC Law, a Cyprus company pays 5% on a dividend from a company abroad when two conditions are met together. More than 50% of the payer's activities lead to investment income. The tax burden on the payer's income is less than half the Cyprus burden, which is 7.5% at the 15% rate. Tax paid abroad on the dividend is credited against the 5%.
| Payer of a €400,000 dividend | Activities giving investment income | Tax on the payer's profit | SDC at 5% |
|---|---|---|---|
| US trading subsidiary | Less than 50% | Any rate | €0 |
| Passive payer, taxed lightly | More than 50% | 4% | €20,000 |
| Passive payer, taxed normally | More than 50% | 12% | €0 |
Article 33A disregards an arrangement made mainly for a tax advantage that defeats the purpose of the tax rules and has no valid commercial reason.
Selling the US company
Article 8(22) exempts the gain on a disposal of shares in a company formed abroad. The Capital Gains Tax Law charges 20% only on Cyprus immovable property and on shares of a company that holds it, directly or indirectly. The shares count when at least 20% of their value comes from that property.
A US LLC under Cyprus law: what the Income Tax Law says and where it is silent
The Income Tax Law names no LLC. Its definition of a company covers any body with or without legal personality and any comparable company formed outside Cyprus. Two rules compare the tax on the foreign company's profit with the Cyprus burden, the SDC test above and the controlled foreign company rule of Article 36A.
Article 36A applies when a Cyprus company holds more than 50% of the votes, the capital or the profit rights of a foreign company. The tax paid on its profits must also be less than half the Cyprus tax. It adds to the Cyprus company's income the foreign company's undistributed profit from non-genuine arrangements, those the foreign company would not have without the Cyprus company that performs the key management functions. It does not apply to a company with accounting profits up to €750,000 and non-trading income up to €75,000, or with profits up to 10% of its operating costs.
Neither article says how tax that falls on the members of an LLC counts where the LLC itself pays none. A Cyprus company that owns an LLC settles that point in writing before the first distribution, from the Tax Department or in an opinion of a Cyprus tax adviser. The answer decides whether the dividend is exempt or bears the 5%.
The Cyprus-US double tax treaty: what it is and what Cyprus does under it
Cyprus and the United States have a double tax treaty, signed at Nicosia on 19 March 1984 and in force since 31 December 1985.
Three articles concern Cyprus. Article 3 counts a Cypriot corporation as a resident of Cyprus. Article 5(2) has Cyprus credit US tax against Cypriot tax. For a Cypriot corporation that owns at least 10% of the voting power of a US corporation, it also credits the US tax that corporation paid on the profits behind the dividend. Article 26 is a limitation on benefits clause, which decides who may claim the relief of the treaty.
Article 4(2) keeps every exemption and credit of national law, so the exemption on dividends received and the absence of withholding on dividends paid stand beside the treaty. The Tax Department issues a Cyprus company a certificate of tax residence on form T.D.98 for €80.
Dividends paid on to a US owner: Cyprus withholds nothing
Cyprus withholds no income tax and no SDC on a dividend paid to a US shareholder. Article 5(2) of the Income Tax Law lists what a non-resident pays tax on in Cyprus, and dividends are not on it. Article 3(1)(d) of the SDC Law adds two exceptions for company shareholders.
| Shareholder abroad | Cyprus tax on the dividend |
|---|---|
| A US individual | None |
| A US company or LLC | None |
| A company in a jurisdiction on the Tax Department's low-tax list, linked to the payer by more than 50% | 5% SDC |
| The same, on the EU list of non-cooperative jurisdictions | 17% SDC |
The 2026 low-tax list names 11 jurisdictions, among them the British Virgin Islands, the Cayman Islands and Jersey. The United States is not on it. Article 3(1)(d)(iv) disregards an arrangement with no valid commercial reason.
If the US owner moves to Cyprus
An individual who becomes tax resident in Cyprus pays SDC on dividends only if also domiciled there. An owner whose domicile of origin is in the United States is not domiciled until 17 of the last 20 years of residence are behind them. Until then the owner pays no SDC and applies for the exemption on form T.F.38. The 2.65% GeSY contribution applies to a tax resident's dividends whatever the domicile, on income up to €180,000.
| Owner, on a €100,000 dividend from 2026 profits | SDC | GeSY | Total |
|---|---|---|---|
| Lives in the United States | €0 | €0 | €0 |
| Tax resident in Cyprus, not domiciled | €0 | €2,650 | €2,650 |
| Tax resident in Cyprus and domiciled | €5,000 | €2,650 | €7,650 |
The steps are in how to distribute dividends in Cyprus and Cyprus non-dom status. A US citizen who forms the company starts with a Cyprus company for US citizens.
We do this for you Company formation in Cyprus from €1,699
What the Cyprus company must show: board, records and bank
A company incorporated in Cyprus is tax resident there by default from 1 January 2026. A company formed abroad is resident when it is controlled and managed from Cyprus (Article 2 of the Income Tax Law). The Tax Department's form T.D.98 for a certificate of tax residence asks 13 questions on where the company is run.
- Most board meetings and the shareholders' meetings are held in Cyprus.
- The board takes the main management and commercial decisions.
- The board minutes are prepared and kept in Cyprus.
- Most directors are tax resident in Cyprus, and the latest certificate of directors is attached.
- The seal, the books and the records are kept in Cyprus.
- Representatives in Cyprus do the filing and reporting, and agreements on the business are signed there.
- A general power of attorney, if issued, is stated with its terms.
A director signs the form to declare that the company is managed and controlled in Cyprus. A nominee director in Cyprus puts a resident on the board, and the law treats a nominee as any other director. The economic substance rules work through all 13 questions. The account of a US-owned company has its own guide: a Cyprus bank account for a US-owned company.
Owners on the record: the register of beneficial owners, consolidated accounts and the auditor
The Cyprus company enters its beneficial owners in the Registrar's electronic register within 90 days of incorporation. A beneficial owner is a natural person with more than 25% of the shares or votes, or with control by other means. A US LLC or company as shareholder does not end the search. A change is filed within 45 days. From 1 October to 31 December each year the company confirms its owners again, and the 2026 window closes on 31 December 2026. A late filing costs €100, then €50 a day up to €5,000.
The directors prepare IFRS financial statements, and at least two sign the balance sheet. The annual general meeting receives them and appoints an auditor under section 153 of the Companies Law. The annual return goes to the Registrar with the statements and a €20 fee.
A company with subsidiaries also consolidates their statements, so a US subsidiary or LLC enters the Cyprus accounts. The Registrar's exemptions include the one for small and medium-sized groups. The choice of audit or review is in accounting requirements of a Cyprus company.
The Cyprus filing calendar from October 2026 to January 2028
Dates for a company with a calendar tax year. We file the returns and show each date in your account: tax services in Cyprus.
| Date | What is due | To whom |
|---|---|---|
| 1 October to 31 December, every year | Confirmation of the beneficial owners | Registrar |
| 30 November 2026 | Tax return T.D.4 for 2024 | Tax Department |
| 31 March 2027 | Tax return T.D.4 for 2025 | Tax Department |
| 31 July and 31 December, every year | Provisional tax, two instalments | Tax Department |
| 31 January 2028 | Tax return T.D.4 for 2026 and the balance of its tax | Tax Department |
| 28 days after its drafting date | Annual return with the financial statements, €20 | Registrar |
Loans and fees between the Cyprus and the US company go into the summary table of controlled transactions that comes with the tax return. To form the company or move a holding into Cyprus, start with setting up a company in Cyprus.
What we do not advise: US tax, US reporting and the classification of a US entity
This guide gives the Cyprus side only. How a US entity is classified for US tax is for your own US adviser. The same goes for what a US owner or company reports to the IRS and what the structure does to US tax. We do not advise on them and do not say that a structure saves US tax.
The sources of this guide list three IRS pages, on an LLC filing as a corporation or partnership, on Form 8832 and on the Cyprus treaty documents. We list them as places to start and do not interpret them.
