12 pages
Long-form treatments of a regime end to end: what it is, how it is applied, and where it breaks down in practice.
Economic substance determines whether a Cyprus company secures tax residency and treaty access. Cyprus applies a management and control test, and the level of substance required scales with the business model, sector and cross-border footprint rather than following a fixed checklist.
The Cyprus IP Box deducts 80 percent of qualifying profit. The remaining 20 percent is taxed at the 15 percent corporate rate, giving an effective 3 percent. That 3 percent is a floor rather than a rate: it is reached only at a nexus fraction of one, and a company whose founder wrote the code starts well below it.
A founder taking a salary from their own Cyprus company runs payroll like any employer: income tax withheld at source, social insurance from both employee and employer, and GESY. The salary supports the residency position and builds a contribution record that dividends do not.
Regulation 6(2) grants permanent residence on a qualifying investment of 300,000 euro plus VAT, supported by secured annual income from abroad of at least 50,000 euro. The permit does not expire, and it does not make the holder Cyprus tax resident.
A residence permit gives permission to live in Cyprus. Tax residency decides which country taxes you. They are granted by different authorities under different tests, and the permit that lets you stay can be the one that blocks the 60-day route to tax residency.
A Cyprus SaaS or AI company pays 15 percent corporate tax from 1 January 2026. Whether any profit reaches the intellectual property floor of 3 percent is decided by who owns the code, who funded its development and where management and control are exercised. Incorporation settles none of the three.
Registration is compulsory once taxable supplies exceed 15,600 euro in any 12 months. The standard rate is 19 percent, with reduced rates of 9, 5 and 3 percent, and a zero rate. What decides whether Cyprus VAT applies at all is the place of supply rather than where the company sits.
Overall income from the asset is multiplied by the nexus fraction to give qualifying profit. The fraction is qualifying expenditure plus uplift, divided by overall expenditure, capped at one. Eighty percent of qualifying profit is then deducted, and the remainder is taxed at 15 percent.
The 2026 reform abolished the Special Defence Contribution on rental income. What remains is income tax for an individual or corporate income tax at 15 percent for a company, in both cases after a statutory 20 percent deduction on gross rents and the deductible expenses.
Selling the shares of a Cyprus company produces no Cyprus tax on the gain, subject to the property test. On an asset sale, intellectual property disposed of as a capital asset is generally exempt, while a disposal forming part of the company's recurring trade is charged to corporate tax at 15 percent.
Source of funds is where the specific money came from. Source of wealth is how the overall wealth was built. A licensed Cyprus provider must document both before acting, and confusing the two is the single most common reason an onboarding stalls.
A Cyprus company files an annual return with the Registrar, an income tax return with audited financial statements, and VAT and payroll returns where registered. The obligations sit with two different authorities on two different timetables, which is why one is so often missed.
It starts with three questions: where your revenue comes from, what you own, and where you are tax resident. From there, the conversation is about what you are building and where you want to take it. After the call, you receive a written proposal covering the recommended structure, the implementation roadmap, and a fixed fee quote.
