Corporate tax in Cyprus: what companies pay now

Cyprus corporate income tax is 15%. The rise from 12.5% was voted by parliament on 22 December 2025, published in the Official Gazette on 31 December 2025, and applies to tax years from 1 January 2026 — it is law in force, not a proposal to monitor. It also did not arrive alone: the same reform cut the tax on dividends for domiciled owners from 17% to 5%, abolished deemed distribution and stamp duty, and stretched loss relief from five years to seven. Judged as a package, company profit reaching an owner’s pocket is taxed more gently than before, even though the headline company rate went up.

Two different 15%s — don’t confuse them

The 15% corporate rate applies to every Cyprus tax-resident company, from a one-person consultancy to a group subsidiary. Separately, Cyprus enacted the Pillar Two global minimum tax in December 2024 — but that regime touches only groups with consolidated revenue of €750 million or more. The income inclusion rule applies from fiscal year 2024 and the domestic minimum top-up tax (DMTT) and UTPR from fiscal year 2025, with a notification to the Tax Department due 15 months after each fiscal year-end — 30 June 2026 for FY2024, under the transitional 18-month window. If your group is under €750 million, Pillar Two is background noise; the ordinary 15% is your number.

Which companies are Cyprus tax resident

Two tests now coexist. The classic one: a company is resident where it is managed and controlled — in practice, where the board genuinely decides things. New from 2026: a company incorporated in Cyprus is resident by default, unless a double tax treaty allocates it elsewhere. The default test closes the gap where a Cyprus company managed from nowhere in particular claimed to be taxable nowhere. Real decision-making in Cyprus still matters — for treaty access, for banks and for counterparties — which is why we treat substance as an operating requirement, not a brochure word.

What is taxed — and the exemptions that matter

Resident companies are taxed on worldwide profits, but the base has founder-relevant carve-outs:

• Securities disposals are exempt. Gains on shares and similar titles carry no income tax — the exception being capital gains tax where Cyprus real estate sits underneath.
• Foreign dividends are usually exempt under participation rules. The exemption fails only where the payer is mostly an investment-income vehicle and its foreign effective tax rate is below 7.5% (raised from 6.25% in 2026); dividends that fail land in SDC at 5% under the new regime.
• Foreign permanent establishments: the exemption for PE profits no longer covers PEs in EU-blacklisted jurisdictions.
• Losses carry forward seven years (up from five), and group relief between Cyprus companies applies after a company uses its own losses.

Deductions worth knowing in 2026

• R&D super-deduction of 120%, extended through 2030 — it stacks naturally with the IP Box, which takes qualifying IP profit to an effective rate of about 3%.
• IPO costs deductible up to €300,000.
• Entertainment expenses capped at the lower of €30,000 or 1% of revenue (previously €17,086).
• Transfer pricing paperwork eased: local file thresholds rose to €5m for goods, €2.5m for services and royalties, and €10m for financial transactions.

Paying during the year: provisional tax

Cyprus collects corporate tax on a pay-as-you-go basis: the company estimates the current year’s taxable profit and pays provisional tax in instalments during the year, with the balance settled after the financial statements and the tax return are done. Estimates can be revised as the year develops. The craft is keeping the estimate realistic — low enough not to lend the state money, honest enough that the year-end true-up is boring. Exact instalment dates go into each client’s compliance calendar, which our accounting team runs.

What 15% means for a small company

At company level, a real increase of 2.5 points. At owner level, the picture usually improves:

• Domiciled owner: dividends dropped from 17% SDC to 5% on post-2025 profits — for owners who distribute, the combined company-plus-dividend burden falls compared with the old 12.5% + 17% mix.
• Non-dom owner: SDC stays at 0%, so the full cost of profit reaching your pocket is the 15% plus GESY of 2.65% capped — the dividend mechanics are unchanged in your favour.
• Reinvesting companies: the rise bites hardest if you retain profits — softened by the abolition of deemed distribution for 2026+ profits, which removed the old tax on not distributing.

How we run it

1. Set the year’s estimate. Provisional tax based on a realistic profit forecast, revised mid-year if the business moves.
2. Keep the base clean. Exemptions, deductions and loss positions tracked in the books, not reconstructed at year-end.
3. Close and file. Financial statements, audit coordination and the corporate return in one chained process.
4. Flag what changes. When rules move — as they just did — you hear it from us with dates and numbers, not from a newsletter six months later.