Corporate Tax in Cyprus – Introduction
Cyprus continues to be one of the most attractive jurisdictions in Europe for internationally minded business owners and entrepreneurs.
A key part of that appeal is the headline corporate income tax rate of 12.5% – one of the lowest in the European Union.
While Cyprus has introduced the OECD’s Global Minimum Tax (GMT) at 15% for large multinational groups, most businesses – including startups, owner-managed consultancies, and investment holding companies – will continue to pay tax at just 12.5%.
The 12.5% Rate – Still the Standard
A Cyprus tax-resident company pays 12.5% corporate income tax on its worldwide income.
The rate is flat – there’s no progressive scale, no local surcharges, and no minimum alternative tax. It’s a clean, single-rate system.
Importantly, Cyprus offers a range of generous exemptions and deductions that can reduce the effective rate even further. For example:
- Gains on the sale of shares and other qualifying securities are fully exempt from tax – regardless of how long they’ve been held or where the buyer is based.
- Dividend income from subsidiaries – whether based in Cyprus or abroad – is typically exempt from both corporate tax and defence contribution, subject to straightforward conditions.
- There are no withholding taxes on dividends, interest, or royalties paid to non-residents (except in limited blacklisted cases).
- Cyprus allows a notional interest deduction on new equity – enabling companies to reduce their taxable profits where capital is injected into the business.
- Qualifying IP income can benefit from an 80% exemption, giving an effective tax rate as low as 2.5% under the Cyprus IP box regime.
These features make the Cyprus tax system especially well-suited to holding companies, IP-owning entities, and group financing arrangements – all operating under a mainstream, EU-compliant framework.
The Global Minimum Tax – 15% for MNEs
Cyprus has also incorporated the OECD’s Pillar Two Global Minimum Tax into its domestic law.
From 2025, this will apply to multinational enterprise (MNE) groups and large domestic groups with consolidated annual revenues over €750 million.
For those groups, Cyprus will apply a minimum effective tax rate of 15% – either through a domestic top-up tax or via the income inclusion rule.
This ensures that large MNEs pay a globally consistent rate, in line with international commitments.
It’s worth emphasising that these rules only apply to large groups meeting the €750m revenue threshold.
Smaller and mid-sized companies, including most Cyprus-based businesses and foreign-owned investment vehicles, are entirely unaffected and will continue to enjoy the standard 12.5% rate – along with all existing exemptions and incentives.
Substance, Simplicity, and Stability
Cyprus does not impose artificial hurdles or excessive formalities.
To be tax-resident, a company must be managed and controlled in Cyprus – typically achieved by having local directors, board meetings in Cyprus, and a registered office.
For many internationally mobile founders and investors, these requirements are both manageable and cost-effective.
There’s also a solid legal and advisory framework, straightforward electronic filing, and a stable policy environment.
Cyprus has been consistent in its messaging: it remains committed to maintaining its competitive corporate tax regime, and to supporting genuine economic activity.
Corporate Tax in Cyprus – Conclusion
For internationally mobile entrepreneurs, Cyprus continues to offer a credible, compliant, and highly competitive corporate tax environment.
The 12.5% tax rate remains in place for the vast majority of businesses, supported by full exemptions for investment income, a growing treaty network, and incentives for equity and innovation.
While large multinationals will be subject to the 15% Global Minimum Tax, Cyprus has chosen to apply those rules narrowly and proportionately – without disrupting the core advantages that have made the jurisdiction so attractive to businesses worldwide
Final thoughts
If you have any queries on this article about Corporate Tax in Cyprus, or tax matters in Cyprus more generally, then please get in touch.