Contents:
1. Tax benefits of Cyprus Company
2. Cyprus Tax Residency for Companies & Individuals
3. Taxation of Individuals in Cyprus
1. Tax Benefits of a Cyprus Company
Corporate tax Rate at 15% – One of the lowest in Europe
The taxable profits of a Cyprus companies are subject to a flat corporate tax rate of 15%. The effective corporate tax rate could even become less by utilizing NID & IP BOX (see below).
NID (Notional Interest Deduction)
Notional Interest Deductions offers a deduction from the taxable profit which could effectively reduce the taxation rate up to 3%. This tool can be utilized with the introduction of new capital to the company that would be employed for the production of taxable income.
Intellectual Property Tax Regime in Cyprus (IP BOX REGIME)
The provisions apply to Intellectual Properties that are acquired, developed or exploited in Cyprus,
and which is a result of research and development activities exercised in Cyprus. Under the IP rules 80% of the qualifying profits of a company generated from qualifying IP’s will be deductible as expenses and thus 20% will be subject to income tax of 15%, reducing the effective tax rate to as low as 3%.
Cyprus Double Tax Treaties
Cyprus has more than 65 double tax treaties that offer considerable advantages on structuring activities through Cyprus. In many cases they confirm that dividends are received gross by Cyprus Tax Resident Companies.
Unilateral Tax Relief
Relief for taxes paid abroad may be claimed in the form of a tax credit against taxes that arise in Cyprus on the same income. The relief is available irrespective of the existence of a double tax treaty with the source country.
Cyprus Holding Companies
In many occasions and depending on the double tax treaties in force, the Cyprus Holding Company receives dividends gross. Payment of dividends to non-Cyprus resident persons is exempt by way of domestic law. Also, payment of dividends by a Cyprus company to its non-Dom Cyprus Tax Residents shareholders is also not subject to withholding tax (see under 2.2 below regarding non-domicile rules).
The Cyprus Non-Domiciled Tax Resident
A person can qualify under either the 183-day or 60-day rule for obtaining tax Residency (see part 2.2 below for more information as to the requirements in each case). This effectively is a 17-year exemption of paying defense tax on dividends (5%) and interest (17%)
Profit from the Sale of shares and other securities
The profit from the sale of shares is always exempt in Cyprus for income tax purposes (please refer to below section on Capital Gains Tax).
Capital Gains tax
No Capital Gains Tax except on profit arising from the sale of immovable property situated in Cyprus
or from the sale of shares of companies not listed on a recognised stock exchange which own
immovable property situated in Cyprus (including indirect ownership where they derive 20% or more
of the market value of their shares from such immovable property)
2. Cyprus Tax Residency for Companies & Individuals
2.1. Cyprus Tax Residency rule for Companies and the Management and Control Test
In accordance with the Cyprus income tax legislation, a company is considered to be tax resident in
Cyprus if it is managed and controlled in Cyprus.
Even though there is no specific definition in the income tax law or in any other Cyprus law as to what
constitutes “management and control”, it is understood that the definition per the OECD model
convention in relation to “place of effective management” is the one to be followed by the Cyprus tax
authorities.
Therefore, a company is tax resident in the Cyprus Republic and enjoys the low corporation tax rate
of 15% on its profits, and taking the advantage of the broad Double Tax Treaties that the country has,
if it is managed and controlled from the Republic.
Management and Control Conditions:
It is expected that the co-existence of the following conditions are very important in determining
management and control:
(i) The majority of the board of directors should be CY tax residents;
(ii) The majority of board meetings must be held in Cyprus;
(iii) All key management and commercial decisions take place in Cyprus.
In December 2025, the tax law has changed and irrespective of Management and Control all Cyprus
registered companies will be taxed in Cyprus.(Incorporation Test)
Substance is of vital importance and will define the main Tax point of the operations of the company,
which is from where the real-effective management and control of the Cyprus company is exercised.
2.2. Cyprus Tax Residency for Individuals
Applicability- Tax Residency Requirements
There are two routes for an individual to obtain the Cyprus Tax Residency:
1) 183 Day Rule
An individual is deemed a Cyprus tax resident if he/she spends at least 183 days in the tax year in Cyprus.
2) 60 Day Rule
In July 2017, the Income Tax Law was amended by adding a second tax residency test- the ‘60-day rule’. Under the ‘60-day rule’, an individual is now considered as a tax resident of Cyprus if, in the relevant tax year, he/she:
a) remains in Cyprus for at least 60 days in the year of assessment; and
b) is engaged in any business in Cyprus and/or is employed in Cyprus and/or holds an office (director) under a Cyprus tax resident company at any time during the year of assessment, provided that such is not terminated during the tax year; and
c) maintains a permanent residence in Cyprus (owned or rented).
d) does not spend more than 183 days in total during the calendar year in any other country.
‘Non-Dom’ Rules- Exemption from Payment of Special Contribution for Defence (SDC) Tax on Dividends, Interest or Rent
Non-Cyprus residents who decide to move their personal tax residency in Cyprus, will be considered
as non-domiciled in Cyprus for a maximum of 17 years. For tax purposes, non-domicile persons who
become Cyprus tax residents are completely exempt from SDC. SDC applies on dividends, interest and
rental income. As SDC tax does not apply in the case of Cyprus tax resident individuals who are nondomiciled in Cyprus, dividend and interest earned by such persons will now be completely tax exempt in Cyprus.
3. Taxation of Individuals in Cyprus
3.1. Income Tax
An individual who is tax resident in Cyprus, is taxed on income accruing or arising from sources both
within and outside the Cyprus. A non-tax resident individual is only taxed on income accruing or arising
from sources within Cyprus.
The Income Tax rates for individuals are progressive, as seen from the table below: