Corporate Tax in Cyprus

Taxation in Cyprus

Cyprus’ taxation system is one of the most attractive in Europe. Member state of the European Union (though not a member of the OECD) the country’s regulatory framework provides one of the lowest corporation taxes in the EU. The taxation of corporations paired with the extensive network of double tax treaties Cyprus has signed with other countries provide an appealing environment for foreign investors.

The corporate tax rate in Cyprus

A company will be taxed on its worldwide income if it was incorporated in Cyprus or has a management board in Cyprus.  Cypriot companies making profits from their activities outside the country are taxed the same as on the incomes they make in the country.  The corporate tax applied to foreign companies will be levied only on the income they make in Cyprus. The corporate tax in Cyprus consists of:

• taxes applied on dividends,
• taxes applied on royalties,
• taxes applied on profits,
• taxes applied on profits made from real estate transactions.

The tax rate applied to corporations is set at 15% from 1 January 2026 (12.5% until 2025) and the capital gains tax is 20% for earnings made from the sale of a real estate property located in Cyprus. Corporations are also subject to a Special Contribution for Defense (SCD) applied to certain dividends. The SCD on dividends is 5% for profits generated from 2026 (17% for earlier profits); interest and rents are no longer subject to SCD. Dividends, if they are not exempt from taxation are subject to SCD at 5% (17% on pre-2026 profits), while royalties paid to non-residents for rights used in Cyprus are subject to withholding tax of 5% on film royalties and 10% on other royalties.

Tax exemptions in Cyprus

Cyprus offers exemptions from the corporate tax when it comes to dividends, interests and royalties provided some conditions are met. Dividends benefit from tax exemptions if they are distributed by a Cypriot company to a non-resident shareholder or if they are received by a company in Cyprus from a foreign company. Interests benefit from tax exemptions if they are distributed to a non-resident shareholder, while royalties are exempt from taxation if they are paid by a foreign shareholder and if they are used outside the country.

Other taxes applied to corporations in Cyprus

Cypriot companies are also required to pay other taxes such as a registration fee of EUR 105 (the 0.6% capital duty was abolished in December 2018) payable when the start-up capital for company registration is issued, (the immovable property tax was abolished as of 1 January 2017), a transfer tax on property that varies between 3% and 8%. Employers must also contribute to the social security fund with 8.8% of an employee’s gross salary (plus 2.9% for the General Health System).

Our lawyers in Cyprus can provide you all the information about the taxation system. You can also contact us if you need details about company incorporation or the legal system in Cyprus.