Cyprus

Imagine operating a company, only to find without any warning that the company’s bank accounts have been blocked. The immediate consequence is one of acute disruption and uncertainty. You learn that a winding-up petition has been filed against the company, triggering restrictions that effectively prevent it from carrying out ordinary financial transactions. At that point, a pressing question arises: how is the business expected to continue operating under such constraints? This situation arises merely because a winding up petition has been filed and is pending against a company. While this situation may appear manifestly unfair, particularly given that it arises in the absence of any court order or any judicial determination on the merits of the winding-up petition,  the company is not left without any relief, and an application to unfreeze the company’s bank accounts can be made (validation order), namely an order that validates the payments to be made by the company.  This article explains how such circumstances typically arise and examines the role of validation orders as the appropriate form of relief. Winding-up petition A winding-up petition constitutes a legal procedure through which a creditor, a contributory, or a competent authority may request the winding up of a company, provided that certain conditions prescribed by law are met. In Cyprus, this procedure is regulated by the Companies Law, Cap. 113, with Part V specifically addressing court-ordered winding-up. A winding-up petition can be made, inter alia, on the ground that it is “just and equitable”, including cases where minority shareholders are oppressed by the majority.1 Once such a petition is filled, it is common practice to serve it on interested parties, such as creditors and banks. Furthermore, a copy of the winding up petition may also be published in the Official Gazette of the Republic.  In most cases, as soon as banks are notified, they usually block the company’s bank accounts, while they may exceptionally permit the execution of certain transactions relating to the daily affairs of the company.2  This reaction is based on the combined interpretation of articles 216 and 218(2) of the Companies Law, Cap. 113, aiming to prevent the company’s officers from disposing the company’s assets after the filing of a winding up petition, to preserve those assets for the benefit of the general body of creditors in the event of liquidation.3  It should be noted, however, that it is debatable to what extent the approach of complete freezing of accounts is legitimate and complies with the intention of the legislature and the rationale of the case law. Articles 216 and 218(2) read as follows: “216. In a winding up by the Court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding-up, shall, unless the Court otherwise orders, be void.” “218(2) (2) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding-up.” Validation order In such a scenario, the company can apply for a validation order seeking the court’s authorisation to validate transactions that would otherwise be restricted. In practical terms, such an order is sought to secure the unfreezing of bank accounts or to allow essential payments to be made, thereby enabling the company to meet its operational and financial obligations. An application of this kind can be made ex parte without an obligation to notify the other party.4 Under Cyprus Law, courts have discretion to issue such an order pursuant to Article 216 of the Companies Law. It is noted that, according to Article 218(2), the commencement of the winding up of a company by the Court is deemed to begin at the time of the filing of the petition for winding-up.5 Balance between asset preservation and business continuity As it is established under Case Law, what is prohibited is the disposition of the company’s property, the alteration of the status of its members, and the transfer of shares, so that the ownership regime of the company as it exists at the time of the filing of the winding-up petition is not affected. The operation of the company as a going concern during the pendency of the winding-up petition is not prohibited. As is stated in the case, Re Application of Nikos Christofi:6 “It is clear from the judgment, based also on the corresponding provisions of England (section 227 of the Companies Act 1948) and the relevant legal writings, that Article 216 aims at the protection and at “…preventing the company’s officers from disposing of its assets after the filing of a petition for its winding up.” It is not intended to hinder the company’s continued operation as a going concern in the meantime...” The case of Re New Steriotis Ltd v. Re Michail Fotios & Sons Ltd7 is an illustrative example. The winding up petitioners proceeded to serve the petition on certain banks. The banks in turn informed the applicants that due to the existence of the petition they had proceeded to freeze their accounts. The court held that if the accounts are not unfrozen, serious issues regarding the company’s survival would arise, since these accounts were used for payments of suppliers abroad, VAT, purchases of machinery, salaries for 40 employees, tax obligations, etc. In exercising its discretion to issue a validation order, the court performs a balancing exercise. On the one hand, the assets of the company must be maintained in case of liquidation for the protection of creditors, and, on the other, not to hinder the company’s ongoing operational and financial obligations. In carrying out this exercise, the Courts should also take into consideration the potential legal consequences that may arise under civil and criminal law for the company and its officers, as a result of the company’s inability to comply with tax and other legal or contractual obligations. As the English court stated in Gray’s Inn Construction Co. Ltd [1980] 1 WLR 711: “The desirability of the company being enabled to carry on its business was often speculative. In each case the court must carry out a balancing exercise.” Conclusion In conclusion, a winding-up petition, whether ultimately well-founded or not, can have significant and disruptive effects on a company, particularly where it is employed to exert pressure on the company or its shareholders. To counter this and ensure the continuity of business operations, the issuance of a validation order is an available remedy, providing a necessary breathing space that allows the company to carry out essential transactions and maintain its activities until the winding-up petition is finally determined by the Court.  The question that remains to be examined by the legislature is whether certain safeguards should be introduced to the law to prevent the mala fides advancement of winding-up petitions as a means to exert pressure on companies. Footnotes In Re Pelmako Development Ltd (1999) 1 Α.Α.Δ. 1369. Ηοllicourt (Contracts) Ltd v. Bank of Ireland (2001) Ch. 555. Hellindo Shipping Company Ltd (2003) 1 A.A.Δ. 238, In Coutts & Co v Stock [2000] 2 All ER 56, [2000] 1 WLR 906. MG Timinis & Sons Ltd, Application No. 76/14, 13/11/2014 MG Timinis & Sons Ltd, and Express Electrical Distributors Ltd v Beavis and others [2016] EWCA Civ 765. Re Application of Nikos Christofi, Civil Application No. 153/13, dated 09/08/2013. Re New Steriotis Ltd v. Re Michail Fotios & Sons Ltd, Application No. 69/2019, 14/6/2019. Iraklis Kyprianou, Advocate/ Associate at Elias Neocleous & Co. LLC.  

The Cypriot tax landscape has undergone a significant recalibration following the entry into force of a broad package of fiscal reforms, effective as from the 1st of January, 2026. Although a considerable part of the legislative focus has centered around corporate-related matters, the amendments introduced in the area of personal taxation are also noteworthy, particularly for internationally mobile individuals, foreign executives and high-net-worth investors considering Cyprus as a jurisdiction for relocation, employment and long-term wealth structuring. The revised framework reflects a clear policy objective of enhancing Cyprus’ competitiveness as an attractive destination for international talent and private capital through the modernisation of existing reliefs, the expansion of targeted exemptions and the reduction of the effective personal tax burden applicable to newly arriving taxpayers. Against this backdrop, this article outlines certain key personal tax measures introduced by the 2026 reform, with particular emphasis on the updated tax residency test under the 60-day test, the revised personal income tax bands, the extension of the non-domicile rules and the employment income tax exemptions available to foreign individuals taking up employment in Cyprus. As a general rule, it is worth noting that individuals qualifying as Cyprus tax residents are subject to tax in Cyprus on their worldwide income, irrespective of whether such income is remitted to Cyprus, subject always to any available double tax relief in respect of taxes paid abroad. Tests for obtaining tax residency Cyprus tax residency is determined pursuant to the Income Tax Law of 2002 (118(I)/2002) (the “Income Tax Law”), which sets out the statutory criteria under which individuals may be treated as tax residents of Cyprus for a given tax year, either by satisfying the “183-day test” or, alternatively, the “60-day test”. “183-Day” Test Where an individual is physically present in Cyprus for one or more periods exceeding, in aggregate, 183 days within the same tax year (being the relevant calendar year), such individual is automatically deemed to be a Cyprus tax resident. In such case, the individual’s worldwide income becomes subject to taxation in Cyprus regardless of whether an application for the issuance of a tax residency certificate is submitted. “60-Day” Test Pursuant to the “60-day test”, which is applicable as from the 1st of January, 2017, an individual may likewise be considered a Cyprus tax resident in a given year, provided that such individual has not stayed in any other country for a period exceeding 183 days in aggregate during the tax year in question and, further, that all three conditions below are satisfied: 1. The individual maintains a permanent residence in Cyprus (whether by owning a permanent residence or leasing out a permanent residence); and 2. The individual undertakes a business in Cyprus (i.e. self-employed) or is employed by (or maintains an office with) a Cyprus company for all the relevant period concerned; and 3. The individual is physically present in Cyprus for a minimum of 60 days during the tax year concerned. For the purposes of both the 183-day and the 60-day tests, the days spent in and outside Cyprus are calculated in accordance with the following statutory rules: • the day of departure from Cyprus is treated as a day outside of Cyprus; • the day of arrival in Cyprus is treated as a day within Cyprus; • the arrival in Cyprus and the departure from Cyprus on the same day are treated as one day within Cyprus; and • the departure from Cyprus and the return to Cyprus on the same day are treated as one day outside Cyprus. Personal income tax rates The 2026 tax reform has revised the income thresholds applicable under the progressive personal income tax scale in Cyprus. The updated applicable income bands and corresponding tax rates are set out below: In addition to the above progressive rates, certain categories of income are exempt from income tax pursuant to the provisions of the Income Tax Law. The most commonly encountered exemptions include the following: • all dividend income; • gains arising from the disposal of securities; • the whole amount of remuneration derived from rendering salaried services outside Cyprus to a non-resident employer, or to a permanent establishment outside Cyprus of a resident employer, for a total period in the year of assessment exceeding 90 days; • foreign exchange (FX) gains, with the exception of FX gains arising from trading in foreign currencies and related derivatives; and • lump-sum repayment from life insurance schemes or from approved provident or pension funds. The Cyprus non-domicile regime A particularly significant feature of the Cyprus personal tax framework remains the non-domicile regime, introduced with effect from the 16th of July, 2015. Individuals who are both Cyprus tax residents and Cyprus-domiciled, are subject to special defence contribution (SDC) on certain categories of income, most notably dividend income at the rate of 5% and passive interest income at the rate of 17%, subject to certain reduced rates of 3% applicable in respect of interest from national and/or European Union government/development bonds, listed corporate bonds, or similar qualifying securities. By contrast, individuals who qualify as Cyprus tax residents but are not considered domiciled in Cyprus for SDC purposes are exempt from SDC on both dividend and passive interest income. This remains the case until such individuals complete 17 years of tax residency in Cyprus, provided that they become Cyprus tax residents for the first time. Importantly, the reform measures further strengthened the attractiveness of the regime by introducing an alternative method of SDC taxation for individuals who, despite not having a domicile of origin in Cyprus, are subsequently deemed to have acquired a Cyprus domicile after completion of the 17-year non-dom period. Such individuals may elect, subject to approval by the Tax Commissioner, to continue benefiting from a fixed and simplified SDC treatment through the payment of a lump-sum contribution of €250,000 covering a consecutive five-year period. The election is irrevocable, applies on a binding basis for the relevant five tax years, and may be exercised for up to two such periods. Employment income tax exemptions for individuals taking up employment in Cyprus A central component of the 2026 tax reform is the retention and refinement of the employment income tax exemptions available to individuals taking up employment in Cyprus. These exemptions continue to represent an attractive feature of the Cypriot personal tax regime, as they are capable of reducing the effective income tax burden of foreign employees, returning expatriates and internationally recruited executives. The legislative framework provides for a tiered system of relief, depending on the level of remuneration, the prior residence status of the individual and the nature of the individual’s employment history immediately preceding relocation to Cyprus. 50% exemption (high-income first employment relief) The most substantial relief is the 50% exemption on employment income derived from first employment exercised in Cyprus. The exemption applies where the individual’s annual remuneration exceeds €55,000 and the individual was not resident in Cyprus for at least 15 consecutive years immediately prior to the commencement of such first employment in Cyprus. The exemption is granted from the tax year in which the first employment commences and remains available for a period of 17 tax years. Importantly, the relief may only be claimed once during the individual’s lifetime, thereby making it a particularly valuable long-term incentive for highly remunerated foreign executives and specialised international personnel relocating to Cyprus. 20% exemption (lower-tier first employment relief) An exemption of 20% of employment income, capped at €8,550 per annum, is also available in cases where an individual takes up first employment in Cyprus following a qualifying period of employment abroad with a non-Cyprus resident employer. This relief is granted for 7 tax years, commencing from the tax year following the year in which employment in Cyprus begins, and is principally designed to facilitate the relocation of mid-level foreign employees who may not meet the remuneration threshold required for the 50% exemption. 25% exemption (brain gain incentive) In addition, a separate 25% exemption exists on employment income (or business profits, where applicable), subject to a maximum annual exemption of €25,000, aimed at encouraging the relocation or return of economically active individuals to Cyprus as part of “brain gain” efforts. The relief applies to individuals commencing employment or business activity in Cyprus between 2025 and 2030, provided that annual employment income or business profits exceed €30,000 and that the individual satisfies the prescribed prior non-residence and overseas employment experience criteria. Where applicable, the exemption is granted from the year of arrival and may continue for up to 7 tax years. As with the 50% regime, the exemption is available once only during the lifetime of the taxpayer. Legacy exemptions (transitional arrangements) In parallel, the legislation preserves certain earlier exemption regimes on a grandfathered basis for individuals whose Cyprus employment commenced under the previous statutory framework. These include, most notably, the earlier 20% exemption as well as the former 50% high-earner exemption linked to the historical €100,000 remuneration threshold. Although no longer available to new entrants, these legacy exemptions continue to apply to qualifying individuals subject to the commencement dates and eligibility requirements in force at the time their Cyprus employment began. Taken together, the above provisions create a broad and flexible package of inbound employment incentives, allowing Cyprus-based employers to structure internationally competitive remuneration arrangements while simultaneously enhancing Cyprus’ attractiveness as a destination for foreign talent and executive mobility. Other noteworthy incentives Further targeted incentives have also been introduced under the recent Cyprus tax reform framework, particularly in relation to equity-based remuneration and the broader taxation of employment-related benefits. Share options and share awards A notable development is the introduction of a new preferential tax treatment applicable to employee share option plans and share awards granted under approved employer incentive schemes. Subject to satisfaction of the prescribed statutory conditions, the benefit arising from qualifying share options or share awards may be taxed at a preferential rate of 8%, thereby potentially creating a more efficient framework for long-term employee incentivisation. The regime is available only where the relevant incentive scheme has been formally approved and incorporates, inter alia, a minimum vesting period of 3 years, restrictions on transferability during the vesting period, and qualifying share participation conditions linked to shares in the employer or its direct or indirect parent company carrying rights broadly equivalent to ordinary shares (save, where applicable, for voting rights). In addition, the relevant options or share awards must carry a minimum exercise or acquisition price which is not lower than 50% of the market value of the underlying shares at the time of approval of the incentive scheme. The preferential 8% tax rate applies up to a benefit equal to twice the employee’s annual remuneration from the same employer in the vesting year (excluding the benefit itself), subject to an overall cap of €1,000,000 per individual over a rolling ten-year period. Definition of taxable employment income In addition, the definition of taxable employment income has been broadened so as to expressly capture a wider range of employment-related benefits. This now includes pre-employment incentives aimed at inducing acceptance of employment or appointment (including “golden handshake” payments or pre-start benefits), as well as certain termination and retirement-related payments such as early retirement incentives and compensation linked to termination of employment or office, thereby providing greater legislative clarity in the tax treatment of increasingly sophisticated remuneration packages. Family and sustainability New targeted reliefs have also been introduced to support households and promote sustainable expenditure. These include enhanced child-related deductions (ranging from €1,000 for the first child up to €1,500 for the third and subsequent children, subject to income thresholds), housing reliefs of up to €2,000 for mortgage interest or rent, as well as green incentives of up to €1,000 for qualifying investments such as electric vehicles, solar panels and battery systems. Taken as a whole, the post-2026 Cyprus personal tax framework reflects a broader legislative effort to align individual taxation with modern patterns of international mobility, executive remuneration and household economic support. When considered alongside the tax residency rules, the continued availability of the non-domicile regime and the expanded inbound employment exemptions, the reforms collectively reinforce Cyprus’ position as a fiscally competitive jurisdiction for foreign investors, internationally mobile employees and multinational groups seeking to establish substantive operational presence within the European Union. Specialist tax advice is essential in order to assess the availability of the above incentives and to ensure that both individual relocation structures and corporate employment arrangements are implemented in a tax-efficient and fully compliant manner. Our team remains happy to provide assistance and guidance in navigating through all tax matters both at an individual and company level. - Elena Christodoulou Advocate / Counsel - Maria Vyronos Advocate/ Associate

As a long-standing supporter of Cyprus’ innovation ecosystem and a Gold Partner of Doers Summit 2026, our firm is proud to play a leading role in one of the region’s most influential gatherings for founders, investors, entrepreneurs and technology leaders.  Taking place in Limassol on 21–22 May 2026, Doers Summit has evolved into a major international platform connecting the innovation communities of Europe, the Middle East and North Africa, bringing together thousands of participants shaping the future of business, technology and investment.  As part of this year’s programme, our firm will host a high-level panel discussion on the Arcade Stage: Capital on Your Terms: Where Strategy Meets Finance 21 May 2026 | 10:50 a.m. In a market environment where capital remains selective, valuations are under closer scrutiny, and founders face increasingly complex strategic choices, raising finance is no longer simply about securing funding—it is about securing the right capital, at the right time, on the right terms. Moderated by our Managing Partner, Elias Neocleous, this discussion will bring together distinguished international voices from entrepreneurship, venture investment, corporate innovation and complex transactions to explore how founders can approach fundraising with greater strategic clarity and long-term perspective. Our distinguished panel includes: Dr. Oded Lieberman A highly accomplished entrepreneur and investor with deep experience in scaling private and public companies through transformative growth milestones, including NASDAQ listings and major strategic exits. As former CEO of NeuroDerm, he played a central leadership role in the company’s acquisition by Mitsubishi Tanabe Pharma in a transaction valued at approximately USD 1.1 billion. Alfredo Gomez Soria Regional Director EMEA at Plug and Play Tech Center, one of the world’s most influential innovation platforms connecting startups, investors and major corporates. His perspective brings valuable insight into fundraising, international scaling and the evolution of high-growth ecosystems—particularly relevant as Cyprus continues to strengthen its technology ambitions. Demetris Roti and Fabian Cabeza Representing our firm’s corporate, finance and transactional capabilities, Demetris Roti, Partner, and Fabian Cabeza, Legal Counsel, will contribute practical legal and structuring insight drawn from extensive experience in cross-border transactions, capital markets, banking and finance. Together, the panel will examine how founders can think more strategically about capital—balancing growth ambitions, investor expectations, governance considerations and long-term value creation. But our contribution to Doers Summit extends beyond the stage.  Throughout the event, our firm will also launch the first-ever Legal Advice Hub, a practical initiative offering attendees the opportunity to book short consultations with specialist lawyers across a range of areas relevant to startups, scaling businesses and innovation-driven ventures.  This reflects a broader belief at our firm: that legal advisers should do more than interpret complexity—they should help ambitious businesses navigate it with confidence. As Cyprus continues its evolution as a centre for innovation, entrepreneurship and international business, meaningful collaboration between founders, investors, advisers and institutions becomes increasingly important. We are proud to support a platform that brings these communities together. We look forward to an engaging and forward-looking discussion at Doers Summit 2026.

Some milestones are about growth. Others are about transformation. The launch of our new Neo.law represents both.  This is far more than a website upgrade. It is a new digital expression of who we are as a firm; our values, our international outlook, our commitment to excellence, and our belief that the future of legal services belongs to those prepared to embrace innovation with intelligence and purpose. We wanted to create something that truly reflects the firm we have become.  A platform that is faster, cleaner, more intuitive and more engaging. A digital experience that makes it easier for clients, colleagues, partners, and visitors around the world to access our people, our expertise, our insights and the capabilities that define our firm. But this is only the beginning. Innovation has long been part of our DNA. Our investment in legal technology did not begin yesterday. Years ago, we took the bold step of developing Neolaw.ai, our proprietary AI platform, as part of our belief that technology should not merely support legal work, but it should intelligently enhance it.  What began as an ambitious innovation initiative has evolved into something far more meaningful: an important part of how we think about the future of legal service delivery, internal efficiency, knowledge management and ultimately the value we create for our clients. NeoLaw.ai is a proprietary AI solution built by lawyers, powered by our own LLM technology, and hosted entirely on our in-house servers. This ensures the highest levels of confidentiality, privacy, and control over our clients’ data. The next phase of that journey is already underway.  Our new digital platform has been built with the future in mind, creating the foundations for increasingly intelligent AI-powered functionality that will make client interaction, legal research, access to knowledge and digital engagement significantly more seamless and sophisticated.  Importantly, innovation at our firm will always be guided by responsibility. As lawyers operating at the highest professional and ethical standards, we are deeply conscious that technological advancement must go hand in hand with trust, privacy, compliance, and sound governance. Our digital transformation and AI initiatives will continue to evolve in full alignment with European regulatory frameworks and leading international standards. For us, legal excellence and innovation are not separate ideas. They increasingly define each other. As Cyprus’ largest law firm and one of the leading legal practices in the wider region, we believe leadership comes with a responsibility not only to respond to change, but to help shape it. Elias Neocleous, Managing Partner, commented: “Our firm has always evolved by combining strong foundations with a willingness to look ahead. The launch of the new neo.law reflects exactly that philosophy. It is not simply a redesigned website; it is a more dynamic expression of who we are, how we think and how we serve our clients.  Our investment in innovation, including the continued evolution of Neolaw.ai and our broader digital initiatives, reflects a clear belief: technology should enhance human expertise, not replace it. The future of legal services will belong to firms that combine excellence, judgment, innovation and trust and we intend to be firmly among those helping define that future.” We invite you to explore the new neo.law. A platform built not just for today, but for what comes next.