Entity
Cyprus Corporate Income Tax
Cyprus Corporate Income Tax: short answer
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Cyprus charges corporate income tax at 15 percent from 1 January 2026, raised from 12.5 percent. A company incorporated in Cyprus is tax resident here unless a treaty provides otherwise, and the management and control test applies alongside that. Dividends from a qualifying participation and gains on disposals of securities sit outside the charge.
| Rate | 15 percent for tax years beginning on or after 1 January 2026 |
|---|---|
| Previous rate | 12.5 percent, to 31 December 2025 |
| Who is within it | Companies tax resident in Cyprus |
| Residence test | Incorporation in Cyprus, or management and control in Cyprus |
| Dividends received | Exempt where the participation exemption conditions are met |
| Disposals of securities | Outside the corporate charge |
| Assurance | Audited financial statements, or a review engagement for small companies from 6 February 2026 |
The rate is the figure founders compare, and it is rarely the figure that decides anything. What the charge reaches, what it never reaches, and where the company is held to be managed usually move the answer further than three percentage points do.
The Cyprus corporate income tax rate, and the figure it replaced
Cyprus charges corporate income tax at 15 percent for tax years beginning on or after 1 January 2026. The rate was 12.5 percent to 31 December 2025, and the change came through the reform package enacted in December 2025.
The rise aligns the headline rate with the global minimum applied to large groups under the Pillar Two framework. For a company below the consolidated revenue threshold that framework brings, this is a rate rise and nothing more. For a group above it, much of the comparison against other jurisdictions was already settled by Pillar Two rather than by domestic rates.
A great deal of material describing Cyprus still quotes 12.5 percent. Anything carrying that figure for a current year was written before the reform, and the same applies to the related figure of 2.5 percent for the intellectual property regime, which is addressed below.
Which companies are within the Cyprus charge
Corporate income tax reaches companies that are tax resident in Cyprus. Two tests now establish that, and they operate together rather than as alternatives to be chosen between.
Incorporation. From 1 January 2026 a company incorporated under the Cyprus Companies Law is treated as tax resident in Cyprus unless a double tax treaty provides otherwise. The condition that previously sat alongside this, that the company not be tax resident in another state, was removed.
Management and control. The older test continues to apply. A company incorporated elsewhere but directed from Cyprus can be Cyprus tax resident on that basis.
The incorporation test moves the starting point rather than closing the question. Where a treaty applies, the tie-breaker asks where the company is effectively managed, and a foreign authority examining the same company asks the same question. Economic substance is what that examination tests, so where decisions are actually taken continues to matter regardless of where the company was registered.
What sits outside the Cyprus corporate charge
Three exclusions do more work for most structures than the rate does.
- Dividends received. Dividend income is exempt in the hands of a Cyprus company where the participation exemption conditions are met. This is the provision a holding company is generally built around.
- Disposals of securities. Gains on disposals of securities sit outside the corporate charge. The definition of securities is specific, and the treatment of shares deriving their value from Cyprus immovable property is a separate question addressed in the 2026 changes below.
- Qualifying intangible income. The Cyprus IP Box gives a notional deduction of up to 80 percent of qualifying profit, computed through the nexus fraction. At full nexus the effective rate on qualifying profit is approximately 3 percent as a best case at the 15 percent rate. The 2.5 percent figure still in wide circulation was correct under the 12.5 percent rate and is not current.
The Notional Interest Deduction operates differently, as a deduction against taxable profit on new equity rather than an exclusion from the charge.
Whether any of these apply turns on the company's own facts, and each carries conditions that have to be met and evidenced rather than assumed.
What changed for companies on 1 January 2026
The rate was one item in a wider package. Four other changes bear directly on a Cyprus company.
| Provision | To 31 December 2025 | From 1 January 2026 |
|---|---|---|
| Corporate income tax | 12.5 percent | 15 percent |
| Corporate tax residence | Management and control in Cyprus | Incorporation in Cyprus, or management and control |
| Deemed dividend distribution | Applied to undistributed profits | Abolished for profits earned from 1 January 2026 |
| Stamp duty | Applied to a range of documents | Repealed |
| Assurance | Audit required for every company | Review engagement available to small companies from 6 February 2026 |
| Shares deriving value from Cyprus property | Threshold of 50 percent | Threshold of 20 percent |
The deemed dividend distribution change is transitional rather than clean. The rules are abolished for profits earned from 1 January 2026, and they continue to apply to undistributed profits of 2024 and 2025 through to 31 December 2027. A company with retained profits from those years is still inside the old regime for them.
The property threshold fell by more than it looks. Shares are treated as deriving their value from Cyprus immovable property at 20 percent rather than 50 percent. A structure that sat outside the charge on the old test may sit inside it on the new one, measured against current asset values rather than those at the time it was set up.
Filing and paying Cyprus corporate income tax
Assurance comes first. Every Cyprus company needs an assurance engagement by a licensed statutory auditor, and it is a precondition for the tax return rather than a parallel exercise. For financial years beginning on or after 6 February 2026, a private company whose net turnover is below 300,000 euro and whose total gross assets are below 500,000 euro, in each case for two consecutive financial years, may opt for a review engagement under ISRE 2400 instead of a full audit. Public companies, public interest entities, regulated financial institutions and companies preparing consolidated statements remain within full audit whatever their size.
The return. The corporate income tax return is filed with the Tax Department supported by those statements, which is why the assurance engagement sits on the critical path.
Provisional tax. Cyprus asks a company to estimate the current year's taxable profit and pay it in instalments during that year, with a balancing payment afterwards. Underestimating by more than the permitted margin attracts an additional charge, so the estimate carries a cost rather than being a formality.
The Cyprus Company Compliance Calendar sets out the full filing year, including the annual return to the Registrar on form HE32 and what missing each deadline costs.
What the rate does not tell you
Three things are decided somewhere other than the headline figure.
Where the company is managed. The incorporation test makes Cyprus residence the starting position for a Cyprus company, and it does not answer what another authority will conclude when it examines the same facts. That question is answered by evidence of where decisions are taken.
What the charge reaches. A holding company receiving exempt dividends and an operating company earning trading profit face the same rate and a very different effective burden. The reliefs are conditional, and the conditions are where the work is.
What happens after the company is taxed. Getting profit out to a shareholder is a separate question with its own charges, and for a founder the combined position usually matters more than the corporate rate on its own.
Common questions
What is the Cyprus corporate tax rate in 2026?
Fifteen percent, for tax years beginning on or after 1 January 2026. The previous rate was 12.5 percent and applied to 31 December 2025. Material still quoting 12.5 percent for a current year predates the reform enacted in December 2025.
Is a company incorporated in Cyprus automatically tax resident in Cyprus?
From 1 January 2026 a company incorporated under the Cyprus Companies Law is treated as Cyprus tax resident unless a double tax treaty provides otherwise. That is the starting position rather than a conclusion. Where a treaty applies, the tie-breaker asks where the company is effectively managed, and a foreign authority examining the company will ask the same question.
Does a Cyprus company pay tax on dividends it receives?
Dividend income is exempt in the hands of a Cyprus company where the participation exemption conditions are met. Whether they are met depends on the facts of the holding and has to be established rather than assumed.
Does the Cyprus IP Box still give an effective rate of 2.5 percent?
No. That figure was correct while the corporate rate was 12.5 percent. With the rate at 15 percent from 1 January 2026, the best case at full nexus is approximately 3 percent. The nexus fraction determines how much of the qualifying profit reaches that treatment, so 3 percent is a ceiling on the benefit rather than a rate to expect.
Do small Cyprus companies still need an audit?
Every company still needs an assurance engagement from a licensed statutory auditor. For financial years beginning on or after 6 February 2026, a private company below 300,000 euro net turnover and 500,000 euro gross assets, in each case for two consecutive years, may opt for a review engagement under ISRE 2400 rather than a full audit. Public companies, public interest entities, regulated financial institutions and companies preparing consolidated statements are excluded from the relief.
Technical definition
A tax on the taxable profits of a company that is tax resident in Cyprus, charged at 15 percent for tax years beginning on or after 1 January 2026 under the Income Tax Law N.118(I)/2002 as amended. Residence follows incorporation under the Cyprus Companies Law unless a double tax treaty provides otherwise, with the management and control test continuing to apply alongside it.
Practical implications
The rate rise applies to everyone, while the reliefs that make Cyprus competitive apply only to companies whose facts reach them. A holding structure taking exempt dividends and an operating company taking trading profit are not in the same position, and neither is settled by the headline rate.
Common misconceptions
That the intellectual property regime still produces an effective rate of 2.5 percent. That figure was correct while the corporate rate was 12.5 percent. At 15 percent the best case at full nexus is approximately 3 percent, and material published before 2026 has not caught up.