In recent years, Cyprus has emerged as one of the most attractive jurisdictions in the European Union for individuals and businesses seeking tax efficiency, legal certainty, and access to international markets. With a robust regulatory framework, English-speaking professionals, and a highly competitive tax system, Cyprus offers a compelling package for entrepreneurs, investors, and multinational groups alike.
In this article, we explore the main tax incentives and rebates that make Cyprus a prime destination for tax planning and business relocation in 2025.
🇨🇾 1. Low Corporate Income Tax (12.5%)
Cyprus offers one of thelowest corporate tax rates in the EUat just 12.5%. This flat rate applies to income generated from business activities within and outside Cyprus, making it particularly attractive for international operations.
✅ Income from trading, services, holding, and IP activities are all subject to this competitive rate.
💡 2. IP Box Regime – Effective Rate as Low as 2.5%
One of Cyprus's most attractive features is its Intellectual Property (IP) regime, fully aligned with the OECD's "nexus approach." Under this scheme:
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80% of qualifying profits from eligible IP assets (e.g., patents, copyrighted software) are exempt from tax.
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The result? An effective tax rate of just 2.5% on qualifying IP income.
This makes Cyprus a powerful location for tech companies, R&D structures, and licensing entities.
📉 3. Notional Interest Deduction (NID)
Cyprus allows companies to deduct a theoretical interest expenseon new equity injected into the company. This encourages financing through equity rather than debt and cansignificantly reduce taxable income.
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The notional interest rate is based on the yield of 10-year government bonds (plus a premium).
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This deduction can apply to both Cypriot and foreign-owned companies.
🧪 4. R&D Tax Deduction – 120% Enhanced Deduction
To encourage innovation, Cyprus provides for an enhanced tax deduction of 120%on qualifying Research & Development (R&D) expenses.
This is ideal for:
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Startups involved in tech and innovation
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Pharmaceutical and biotech firms
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Fintech and AI companies conducting research activities in Cyprus
💼 5. Tax Benefits for Investment in Innovative SMEs
Cyprus encourages private investment in innovation with tax deductions for individuals who invest in certified innovative SMEs:
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Up to 50% of taxable incomecan be deducted (subject to a cap of €150,000/year).
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Applicable to both business angels and founders.
🎬 6. Tax Rebates for Film & TV Productions ("Olivewood" Incentive)
Cyprus offers a cash rebate of up to 35% for qualifying audiovisual productions. Eligible projects include films, series, animations, and documentaries.
Benefits include:
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Tax credit or cash rebate up to 35%
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VAT returns on expenses in Cyprus
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Exemption from import duties on filming equipment
Cyprus is steadily becoming a popular filming destination under the "Olivewood" branding.
💰 7. Personal Tax Incentives for Non-Domiciled Individuals
High-net-worth individuals (HNWIs), digital nomads, and foreign professionals relocating to Cyprus can benefit from:
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Exemption from tax on dividends and interest for non-domiciled residents
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50% income tax exemption for individuals earning over €55,000 annually who relocate to Cyprus
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No wealth tax, inheritance tax, or gift tax
This regime has attracted professionals, startup founders, and international executives to relocate permanently or semi-permanently to Cyprus.
🌍 8. Extensive Network of Double Tax Treaties
Cyprus has signed over 65 double tax treaties with countries including the UK, Germany, India, the USA, and many more. These treaties help businesses:
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Avoid double taxation
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Gain tax credits for taxes paid abroad
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Access reduced withholding tax rates on dividends, interest, and royalties
📌 Final Thoughts
Cyprus offers one of the most business-friendly environments in Europe. With strategic location, tax certainty, and comprehensive legal infrastructure, it is an ideal destination for:
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Headquartering European operations
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Managing global IP and licensing activities
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Relocating personal tax residence
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Optimizing international tax planning
At Christos Paraskevas LLC, we specialize in helping businesses and individuals take full advantage of Cyprus's tax landscape. From structuring and relocation to licensing and compliance, we provide bespoke legal and tax planning solutions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
