Cyprus has long been recognized for its favourable corporate tax system, attracting businesses and high-net-worth individuals (HNWIs) seeking tax efficiency. The country's tax regime remains one of the most competitive in the EU, offering strategic advantages to companies and individuals alike.
Key Features of the Cyprus Tax System
- Low Corporate Tax Rate
- Cyprus maintains a standard 5% corporate tax rate, one of the lowest in the EU.
- The country is implementing the OECD's 15% minimum tax rule for multinational enterprises (MNEs) in 2024, but SMEs will remain largely unaffected.
- Attractive Non-Domicile Regime
- Foreign individuals who become Cyprus tax residents but are classified as non-domiciled are exempt from taxes on worldwide dividends and interest income for 17 years.
- This makes Cyprus an ideal jurisdiction for expatriates and international entrepreneurs seeking tax optimization.
- IP Box Regime
- Companies that hold qualifying intellectual property can benefit from an effective 5% tax rate on IP income.
- This regime is particularly attractive for tech startups, software developers, and R&D firms.
- No Withholding Taxes on Dividends, Interest, and
Royalties
- Cyprus does not impose withholding tax on outbound dividends, interest, and royalties (under certain conditions), making it ideal for international holding structures.
- Tax Incentives for New Businesses and Startups
- Companies engaging in research and development (R&D) can claim additional tax deductions.
- Startups and innovative companies can benefit from tax relief measures to encourage economic growth.
- Extensive Double Tax Treaty Network
- Cyprus has signed over 65 double tax treaties (DTTs), reducing tax liabilities for companies operating in multiple jurisdictions.
Recent Tax Developments and Compliance
- Adoption of the Global Minimum Tax: Large multinational corporations (with revenues exceeding EUR 750 million) will be subject to the OECD's 15% minimum tax, aligning Cyprus with global tax trends.
- Enhanced Economic Substance Requirements: Companies must demonstrate genuine economic activity in Cyprus to benefit from tax advantages.
- EU and OECD Compliance: Cyprus continues to align with EU anti-tax avoidance measures (ATAD) and OECD Base Erosion and Profit Shifting (BEPS) initiatives to maintain its status as a reputable tax jurisdiction.
Conclusion
The Cyprus tax regime remains a compelling choice for businesses and investors due to its low corporate tax rates, attractive incentives, and strategic international tax planning opportunities. Whether for multinational corporations, startups, or HNWIs, Cyprus continues to offer one of the most competitive and compliant tax systems in the EU.
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.
