Cyprus tax law – understanding them as a foreigner with no knowledge of the local knowledge is hard!
We have asked an accountant from Cyprus to help us to answer your questions and we have summarized them all here for you!
Introduction: Cyprus tax laws
Cypriot President Nikos Christodoulides announced his vision for 2025 earlier this year, outlining over 80 reforms aimed at reducing bureaucracy and increasing (particularly digital) efficiency in Cyprus.
As part of this, several tax reforms are now emerging in Cyprus that will affect both individuals and businesses.
The planned changes include revisions to
- income tax,
- dividends, and
- corporate profits
They are overall seen as largely positive.
Some adjustments may attract more attention than others, but as always, individual circumstances are key. Let’s take a closer look at what we can expect in Cyprus.
Important note:
As of March 2025, these reforms are not yet legally in effect, but are highly likely to be implemented by 2026. This text will be updated accordingly once clarity is available.
We help entrepreneurs in Cyprus to find solutions offshore to further decrease their taxes.
We will discuss this at the very end of this article.
If you are impatient and have less time, feel free to book a consultation call with our legal experts right away.
Side information: Non-Dom
In this article, we often use the phrase Non-Dom.
This is a legal term in the Cyprus law for foreigners who
- are tax residents in Cyprus (they live there at least 180 days per year)
- they are not domicile in Cyprus (meaning: They have no Cypriot parents or were born or have the nationality)
This applies to all foreigners who move to Cyprus and why foreigners frequently ask about Non-dom status in Cyprus.
Cyprus Tax Law: Company taxes in Cyprus
Let’s begin with the changes for companies or legal entities in Cyprus – and some bad news:
The current corporate tax rate of 12.5% is to be increased to 15%.
Cyprus is thus following a global trend, primarily initiated by the OECD, aimed at standardizing minimum taxation levels.
The background here is the OECD’s objective, alongside around 140 countries, to implement international tax reform that introduces a global minimum tax in order to make so-called tax havens less attractive.
At the core is the 15% minimum tax on corporate profits, intended to ensure that corporations can no longer reduce their tax burden by shifting profits to low-tax countries.
Until now, Cyprus has been below this threshold at 12.5%. By raising it to 15%, Cyprus is aligning itself with OECD recommendations and complying with the new international tax framework. This move also addresses pressure from the EU.
Notably, the 15% tax is expected to apply to all companies in Cyprus, regardless of revenue, not just to multinational corporations with revenues above €750 million. However, this is still under discussion and may end up being limited to large firms.
Cyprus Company Tax Law: Deemed Dividend Distribution (DDD)
The deemed dividend distribution (DDD) is a tax mechanism introduced in Cyprus in 2002. It assumes companies distribute part of their after-tax profits, even if no actual dividend is paid.
Its purpose is to prevent companies from indefinitely retaining profits without taxation. For non-doms, who are already exempt from dividend taxes, this has been largely irrelevant — but Cypriots and domiciled individuals are affected.
Now, Cyprus plans to abolish this rule.
The removal of DDD brings several benefits:
- Greater autonomy for companies in dividend decisions
- Less tax pressure
- Flexibility to reinvest profits for growth and expansion
- Reduced administrative burden and simplified tax planning
Cyprus Company Tax Law: Loss Carryforward from 5 to 10 Years
Tax losses from one year can now be carried forward and offset against profits for up to 10 years, instead of 5.
This supports:
- Long-term tax planning
- Investment in sustainable initiatives
- Innovation in green technologies
- More flexibility in business structuring
The Group Relief mechanism (offsetting losses within a company group) remains unchanged — a welcome continuity.
Cyprus Company Tax Law: Depreciation for Green Investments
To support its sustainability goals, Cyprus will increase depreciation rates for:
- Green technologies
- Energy-efficient infrastructure
This allows companies to deduct a higher percentage of investment costs, lowering taxable income and encouraging eco-friendly business activities.
Cyprus Company Tax Law: Retained Tax Incentives
These programs will continue:
- Notional Interest Deduction (NID): Lets companies deduct a “notional” interest on equity, similar to interest on debt.
- IP Box Regime: Allows companies to exclude up to 80% of income from intellectual property (e.g., patents, software, trademarks) from tax.
With an effective tax rate of only 2.5% on IP income and great double tax treaties, Cyprus remains a top location for tech and invention-based companies.
Cyprus Tax Law: Reforms Affecting Individuals in Cyprus
Cyprus Tax Law: Tax-Free Allowance
- Tax-free threshold increases from €19,500 to €20,500
- The top income tax rate of 35% will apply only above €80,000 (instead of €60,000)
This benefits:
- Startups
- Small business owners
- Those in the early phase of building a company
Cyprus Tax Law: Tax Benefits for Families and Households
- Households with up to €80,000 total income and both spouses working will see new tax breaks
- €1,000 tax relief per child
- Additional deductions for students:
- €1,000 for female students under 23
- €1,000 for male students under 24
- €1,000 for female students under 23
- €1,500 yearly deduction for mortgage repayments on first homes
- €1,000/year for eco-friendly home renovations, available for up to five years
Cyprus Tax Law: 50% Exemption for High Earners Maintained
The 50% income tax exemption for individuals earning more than €55,000 from employment remains unchanged.
Cyprus Tax Law: New Tax Residency Model
Cyprus plans a major reform to its tax residency rules.
Currently, there are two main routes:
- 183-day rule (classic tax residency)
- 60-day rule for non-doms (minimum stay + limited company + no other tax residency)
As of 2026, Cyprus plans to:
- Abolish the fixed 60-day rule
- Shift focus to the “center of vital interests” concept (internationally recognized)
This means tax residency will be based more on where your life and business are centered, not just on physical days in the country.
Key factors may include:
- Primary residence in Cyprus
- Main economic activity/business in Cyprus
For current non-doms, the 60-day rule is expected to remain valid. New applicants may face stricter requirements or a higher physical stay, though some flexibility is also possible.
Cyprus Tax Law: Reduction of Special Defence Contribution (SDC) on Dividends
- SDC on dividends will drop from 17% to 5%
- 3% SDC on rental income will be abolished
This change:
- Makes Cyprus even more attractive for investors
- Reduces bureaucracy
- Encourages reinvestment of profits
Combined with the revised residency model, Cyprus becomes highly attractive even without non-dom status.
Cyprus Tax Law: Non-Dom Regime
- The non-dom regime remains unchanged for existing users (guaranteed for 17 years)
- Dividends and interest remain exempt from SDC
- For new applicants, Cyprus may introduce a flat annual “non-dom fee” (e.g. €5,000–€10,000) instead of the 60-day rule
Such a fee would:
Maintain SDC exemptions
Possibly allow residency certificates regardless of physical presence
Further reading:
Read more about the Non-Dom Regime and how to use it to pay even less than 12% corporate tax.
Cyprus Tax Law: Stamp Duty Reform
Cyprus plans to limit stamp duty to:
- Real estate transactions
- Insurance contracts
This simplifies business processes and reduces red tape.
Crypto Taxation Reform
Cyprus will finally bring clarity to crypto taxation:
- Occasional crypto trading will likely be tax-free capital gains
- Day trading / commercial crypto activity will be taxed as income
- Foreign companies can still be used to avoid tax, as long as management is outside Cyprus
Cyprus Tax Law: Outlook – Tax Haven 2.0
Cyprus remains one of the best relocation destinations worldwide. Many entrepreneurs miss out on the full benefits because they:
- Use a Cyprus Ltd (and pay unnecessary tax)
- Could legally operate tax-free using foreign structures
With €50,000+ annual profit, foreign structures (e.g., a Hong Kong LLC) can already be more cost-effective than a Cyprus Ltd.
This is due to couple of laws that combined together give great benefits:
- You bill your clients from a Hong Kong company (this will be taxed 0% in Hong Kong by the offshore and dividend law in Hong Kong)
- You need to prove that you do not manage the company from Cyprus (so it is not being taxed as a Cypriot company)
- This is easly done by having a local co-director in Hong Kong
How this plays out in full and how other foreigners in Cyprus have already used it, you can discuss with us in a video call.
