Major structural changes to Cyprus tax law have historically been relatively infrequent. Targeted amendments are, however, introduced periodically to reflect developments in EU law, OECD initiatives, international tax standards and domestic policy priorities. This has allowed Cyprus to maintain a comparatively stable and predictable tax framework while continuing to adapt to developments in the international tax environment.

Significant tax measures generally proceed through the established legislative process and are often preceded by consultation with relevant stakeholders, including professional bodies, industry representatives and tax practitioners. This consultation process is particularly important in Cyprus, given the role of the tax framework in supporting both the domestic economy and the country’s position as an international business and investment centre.

Most recently, Cyprus completed the most comprehensive reform of its tax system in more than two decades. The relevant legislation was approved by the House of Representatives in December 2025, published in the Official Gazette on 31 December 2025 and, for the most part, became effective from 1 January 2026. The reform was intended to modernise the tax framework, strengthen tax administration and compliance and ensure that the system remains responsive to contemporary economic and international tax developments.

Importantly, the reform did not represent a fundamental departure from Cyprus’ established tax policy. A number of the key features underpinning Cyprus’ attractiveness as a business and investment jurisdiction were preserved, including the IP regime, the tonnage tax regime for qualifying shipping activities, the notional interest deduction framework, the participation exemption for qualifying dividend income and the general exemption for gains from the disposal of qualifying securities. The non-domicile framework was also retained and further developed, while the individual tax residency rules were refined as part of the reform.

The 2026 reform may therefore be viewed principally as a modernisation of the existing system rather than a change in direction. Cyprus has sought to balance competitiveness and legal certainty with the need to strengthen compliance, respond to international developments and maintain a tax framework consistent with its obligations as an EU Member State and participant in the evolving international tax architecture.

Taxpayers in Cyprus are subject to a number of registration, filing, payment and record-keeping obligations.

Companies must register with the Cyprus Tax Department within 60 days of incorporation, becoming Cyprus tax resident or acquiring taxable income. Taxpayers are also required to notify the Tax Department of prescribed changes to their registered information, including changes to their address or email address, within 60 days.

Taxpayers who fall within the relevant filing requirements must submit an annual income tax return. Following the tax reform effective from 1 January 2026, the income tax return of a company, and of an individual who is required to prepare audited or reviewed financial statements, is generally due by 31 January of the second year following the relevant tax year. Thus, for example, the return for the 2026 tax year is due by 31 January 2028. The final income tax liability under the self-assessment system is payable by the same deadline.

Cyprus also operates a provisional tax system. The provisional tax declaration is generally submitted by 31 July of the relevant tax year and the resulting liability is paid in two instalments, on 31 July and 31 December. The provisional tax computation may be revised by 31 December. Special rules apply where a company becomes liable to tax, or an individual begins earning relevant non-employment income, after 30 June of the year, in which case the provisional tax obligation may arise by 31 December.

Companies incorporated in Cyprus must maintain appropriate accounting records and prepare financial statements in accordance with the applicable accounting and company-law requirements. As a general rule, financial statements are subject to statutory audit. However, following amendments to the Companies Law, certain qualifying small private companies may elect for an independent review engagement instead of a statutory audit, subject to the applicable statutory conditions and financial thresholds. The revised audit/review framework applies for financial years beginning on or after 1 January 2023.

For individuals, the threshold above which audited or reviewed financial statements are required in respect of income from a trade or business, rents, dividends, interest, royalties or trading goodwill has increased from EUR 70,000 to EUR 120,000 per annum.

Employers are subject to separate payroll withholding, payment and reporting requirements, including the filing of the annual Employer’s Return and the payment of PAYE and other relevant contributions through the prescribed electronic systems. The 2026 reforms have also expanded the information that employers are required to report in respect of employees and other persons receiving remuneration or financial benefits.

In relation to record keeping, books, accounting records and supporting documentation relating to tax returns must generally be retained for six years. Following the 2026 reform, the six-year period is calculated from the later of:

• the statutory deadline for submission of the relevant tax return or amended tax return; and
• the actual date on which the relevant tax return or amended tax return is submitted.

Where a tax audit commences during the final year of that six-year period, the records must be retained until completion of the audit or for one year from the commencement of the audit, whichever occurs first.

The Important Notice similarly confirms that companies must maintain complete and up-to-date accounting records, supported by the underlying documentation, in a manner allowing audited financial statements to be prepared accurately and within the prescribed time limits.

Tax filings and payments are increasingly administered electronically, and the 2026 reforms have strengthened the Tax Department’s powers to obtain information, impose penalties and enforce compliance.

The principal tax authority in Cyprus is the Tax Department of the Ministry of Finance, which is responsible for the administration and enforcement of the principal direct and indirect tax legislation, including income tax, corporate income tax, Special Defence Contribution (“SDC”), VAT and capital gains tax.

In recent years, the Tax Department has increasingly digitalised its operations through the implementation of the Tax For All (“TFA”) platform, which is intended to operate as the Department’s unified tax administration system and is progressively replacing elements of the older TAXISnet infrastructure. The transition is still ongoing: certain filings remain available through TAXISnet, while an increasing number of registration, filing, payment and taxpayer-service functions are being migrated to TFA. The Tax Department itself describes TFA as its unified tax-management system, while current TAXISnet services remain operational for certain purposes.

The Department also issues circulars, announcements and other administrative guidance, while communication with taxpayers and their representatives may take place electronically, through the relevant online systems, or directly with the competent offices of the Tax Department.

Tax disputes are generally first dealt with through the statutory administrative objection procedure. Following the 2026 tax reform, an objection against a tax assessment under the Assessment and Collection of Taxes Law may be submitted in writing or electronically and must generally be lodged within 60 days from notification of the assessment. The reform therefore replaces the former deadline, which was linked to the end of the month following notification, with a clearer fixed 60-day period.

Where the taxpayer disagrees with the Tax Commissioner’s determination of the objection, Cyprus law provides further avenues of challenge. In appropriate cases, the taxpayer may file a hierarchical appeal with the Tax Tribunal (Εφοριακό Συμβούλιο), which is an existing specialist administrative body and not merely a proposed future tribunal. Under the Assessment and Collection of Taxes framework, such a hierarchical appeal is generally required to be lodged within 45 days from notification of the relevant decision. The legislation also permits judicial recourse against the relevant administrative tax decision under Article 146 of the Constitution.

The position should be distinguished slightly in relation to VAT. The Tax Department’s current guidance provides that a VAT objection is generally submitted within 60 days from notification of the relevant decision. If the taxpayer remains dissatisfied after the Commissioner’s decision on the objection, a hierarchical appeal may be made to the Tax Tribunal, for matters falling within the relevant provisions of the VAT Law, within 45 days. Alternatively, or as applicable following the administrative process, the taxpayer may bring a recourse before the Administrative Court under Article 146 of the Constitution, generally within 75 days from notification of the relevant administrative decision. The Tax Department expressly confirms that recourse to the Administrative Court does not necessarily depend on first bringing a hierarchical appeal before the Tax Tribunal.

The judicial route is therefore principally through the Administrative Court, rather than the District Court, for challenges to tax assessments and other administrative tax decisions. The Administrative Court exercises judicial review jurisdiction under Article 146 of the Constitution.

Yes. Tax disputes in Cyprus may ultimately be heard by bodies independent of the Tax Department.

Following the Tax Commissioner’s decision on an objection, a taxpayer may, depending on the applicable tax legislation, submit a hierarchical appeal to the Tax Tribunal (Εφοριακό Συμβούλιο). The Tax Tribunal is an independent administrative body which may review the substance of the dispute and may confirm, cancel or amend the Tax Commissioner’s decision, issue a new decision in its place, or remit the matter to the Tax Commissioner with directions. A hierarchical appeal must generally be filed within 45 days from notification of the relevant decision.

The Tax Tribunal is required to complete its examination and issue its decision as soon as possible and, in any event, no later than one year from the filing of the hierarchical appeal. Accordingly, while the actual duration will depend on the complexity of the case and the material involved, the statutory framework contemplates completion of the Tribunal stage within one year.

A taxpayer may also challenge an administrative tax decision before the Administrative Court under Article 146 of the Constitution. The Administrative Court has exclusive first-instance jurisdiction over recourses against acts, decisions or omissions of public administrative authorities. In tax matters, the Court may, in the circumstances permitted by law, exercise not only annulment jurisdiction but also substantive jurisdiction.

There is no equivalent fixed statutory period within which an Administrative Court tax case must generally be determined. The duration therefore depends on factors such as the complexity of the dispute, the volume of evidence and submissions, the Court’s caseload and whether further appellate proceedings follow.

Following the restructuring of the Cyprus judiciary, further appeals in public-law matters are dealt with under the current appellate framework, with the Supreme Constitutional Court having jurisdiction in specified cases involving decisions of the Administrative Court and issues of public law or major public importance.

Cyprus operates a self-assessment and provisional tax system. For taxpayers subject to provisional income tax, the provisional tax liability is generally payable in two instalments, on 31 July and 31 December of the relevant tax year. The provisional tax computation may be revised by 31 December. The 2026 reforms retained these dates, while introducing specific rules for taxpayers who become liable after 30 June, who may instead be required to submit and settle their provisional tax position by 31 December.

For companies and individuals required to prepare audited or reviewed accounts, the deadline for payment of the final income tax liability under the self-assessment regime has changed with effect from the 2026 tax reform. The tax is now generally payable by 31 January of the second year following the relevant tax year, being the same deadline as the annual income tax return. Thus, the final tax for the 2026 tax year is generally due by 31 January 2028.

Other taxes operate according to their own statutory payment cycles. For example, VAT is normally payable when the relevant VAT return is due for the prescribed tax period. The Tax Department’s current guidance provides that payment of VAT declared in a return must be made no later than the applicable filing/payment deadline for that VAT period.

Late payment may give rise to interest, surcharges and monetary penalties. The 2026 reform retains a 5% charge on unpaid tax, with an additional 5% charge where the amount remains unpaid for more than two months, while interest for late payment may also accrue under the applicable legislation. The reform also clarifies the order in which payments are allocated against outstanding tax liabilities, beginning with late-payment interest and other charges before being applied to the principal tax amount.

Special rules do apply where an amount of tax is disputed. The mere filing of an objection does not necessarily mean that all payment obligations are suspended. The applicable treatment depends on the type of tax and the appeal route being used.

In the case of VAT, the Tax Department expressly states that, before the Tax Tribunal will examine a hierarchical appeal, the taxpayer must have filed the relevant returns and paid or otherwise settled the amounts shown as payable on those returns, together with the undisputed amounts. The disputed amount itself is therefore treated differently from amounts which the taxpayer accepts as due.

More generally, the Assessment and Collection of Taxes framework contemplates that, when challenging an assessment, the taxpayer identifies the amount which they accept as properly payable and the amount which is disputed. The undisputed portion should therefore be paid within the applicable deadline, while the disputed balance follows the statutory objection and appeal procedure. Official Tax Department objection material expressly requires the taxpayer to state the amount offered against the final tax liability pending settlement of the objection.

Accordingly, as a practical rule, taxpayers should not assume that filing an objection automatically suspends the entire assessed liability. Any amount that is not in dispute should normally be paid when due, while the treatment of the disputed portion depends on the particular tax and the statutory appeal procedure being followed.

Yes. The Cyprus Tax Department and its officers are subject to statutory confidentiality obligations in relation to taxpayer information.

In particular, section 4(2) of the Assessment and Collection of Taxes Law, Law 4/1978, requires every person performing duties in connection with the administration of the tax legislation to treat as secret and confidential any information coming to their knowledge, including tax returns, documents and tax records relating to a taxpayer.

Taxpayer information and personal data are also protected under the General Data Protection Regulation (EU) 2016/679 (GDPR) and the applicable Cyprus data protection legislation. The Tax Department expressly states that the personal and tax data held in its records are subject to privacy and confidentiality requirements and may be used for legitimate statutory purposes, including verifying tax information, preventing or detecting offences and safeguarding State revenue.

The 2026 tax reform has not removed these protections. Rather, the amendments expressly regulate the Tax Commissioner’s power to collect and process personal data for the prevention of tax fraud and tax evasion, while requiring such processing to comply with the GDPR, Cyprus data protection legislation and the applicable safeguards relating to profiling and automated decision-making.

The duty of confidentiality is not absolute. Taxpayer information may be disclosed where this is specifically authorised or required by law, for example in connection with the administration and enforcement of tax legislation, proceedings before the courts or competent bodies, or the exchange of tax information with foreign tax authorities under double tax treaties, EU legislation, the Common Reporting Standard and other applicable international arrangements. The Tax Department’s privacy policy similarly confirms that information may be disclosed to third parties where authorised by the taxpayer or required by law, and may be exchanged with other countries and government authorities where an appropriate legal basis exists.

Accordingly, taxpayer information is generally protected by a statutory duty of secrecy and confidentiality, subject to specific statutory exceptions permitting disclosure or exchange of information for legitimate tax, enforcement and international cooperation purposes.

Yes. Cyprus has implemented the OECD Common Reporting Standard (“CRS”) and participates in the automatic exchange of financial account information. Cyprus is a signatory to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) and commenced exchanges under the CRS in September 2017. It has also implemented the relevant EU framework through Directive 2014/107/EU (DAC2).

The CRS requires Cyprus reporting financial institutions to carry out prescribed due diligence procedures, identify reportable accounts and report relevant financial account information to the Cyprus Tax Department for onward automatic exchange with participating jurisdictions. The regime covers, among others, depositary and custodial institutions, investment entities and certain insurance companies, and may require reporting of controlling persons of passive entities, including in appropriate cases trusts and foundations.

Cyprus has also signed the 2024 Addendum to the CRS MCAA, reflecting the updated international CRS framework.

Cyprus also maintains a central Register of Beneficial Owners for companies and other legal entities, administered electronically by the Registrar of Companies. The register was established following the transposition of the Fifth EU Anti-Money Laundering Directive into Cyprus law. Companies and other in-scope entities are required to submit and keep their beneficial ownership information up to date.

However, the register should not currently be described as a public register. Following the judgment of the Court of Justice of the European Union in Joined Cases C-37/20 and C-601/20, general public access to the Cyprus Beneficial Owners Register was suspended from 23 November 2022. The obligation to maintain and report beneficial ownership information was unaffected.

At present, competent and supervisory authorities have access to the register, while obliged entities may obtain prescribed beneficial ownership information for customer due diligence purposes, subject to the applicable procedure and fee. The Registrar’s current guidance expressly confirms that access for the general public remains suspended.

Accordingly, the correct current position is that Cyprus maintains a central beneficial ownership register, but it is not open to unrestricted public access. This is also consistent with the developing EU framework, under which access is moving towards persons able to demonstrate a legitimate interest, rather than unrestricted access by any member of the public. For example, CySEC’s March 2026 consultation concerning the separate register of beneficial owners of express trusts specifically provides for removal of general public access and access instead on a legitimate-interest basis.

From a Cyprus tax perspective, following the amendments introduced as part of the 2026 tax reforms to Article 2 of the Income Tax Law, a company will generally be regarded as a Cyprus tax resident where either (i) its management and control is exercised in Cyprus or (ii) it is incorporated in Cyprus, unless otherwise determined under an applicable double tax treaty.

Whilst Article 2 now provides an independent incorporation-based test for Cyprus tax residence, this does not diminish the continuing practical significance of the management and control analysis. This remains particularly relevant where another jurisdiction could assert tax residence under its domestic law or where an applicable double tax treaty determines corporate tax residence by reference to different criteria, such as the place of effective management or similar management and control concepts.

Cyprus legislation does not define the concept of “management and control” and the determination is therefore a question of fact based on the particular circumstances of each case. The Cyprus Tax Department has, through its administrative guidance (circulars) and practice (including the tax residency certificate application process), historically identified a number of indicators that support a Cyprus tax residency position. These include, in particular, that the majority of the directors are Cyprus tax resident, board meetings are held in Cyprus and the Company’s key strategic and policy decisions are taken in Cyprus. Such factors are considered collectively as part of an overall assessment of the Company’s governance and operational profile, with a view to determining where its effective management and control is exercised in practice. Relevant other considerations include, amongst other things, the role of the directors, the exercise of banking and treasury functions, the maintenance of books and records, and the level of commercial and operational substance maintained in Cyprus.

Cyprus partnerships are generally treated as tax transparent for income tax purposes, with the partners being taxed on their respective shares of the partnership income rather than the partnership being subject to corporate income tax as a separate taxable company. The 2026 reforms introduced a separate annual filing obligation for partnerships, but this does not of itself alter their transparent character for income tax purposes.

For trusts, residence requires a separate analysis. In particular, the residence of a trust and the tax treatment of its income depend on the applicable trust and tax rules and the residence/status of the trustees and beneficiaries.

Accordingly, the principal test for companies is now management and control or Cyprus incorporation, subject to treaty override, while fiscally transparent entities generally require consideration of the residence of the persons to whom their income is attributed and, for certain international reporting purposes, their place of effective management.

Yes, the Cyprus Tax Department does closely monitor cross-border transactions within multinational or international groups, particularly to ensure compliance with transfer pricing rules, anti-avoidance measures, and OECD and EU standards.

• Under the Cyprus CFC rules, a company not tax resident in Cyprus, the profits of which are not taxed or are exempt from tax in Cyprus, is considered to be a CFC if the following conditions are met: in the case of a non-Cypriot tax resident entity, a Cypriot tax resident company alone, or together with its associated enterprises, holds a direct or indirect participation of more than 50% in such an entity; and
• the company or PE is low-taxed (i.e. the income tax it pays is lower than 50% of the Cypriot corporate income tax that it would have paid by applying the provisions of the Cyprus Income Tax Law).

Cyprus has opted for Model B since it gives states the ability to ‘carve out’ CFCs via the thresholds provided by ATAD. ‘Carving out’ would apply to entities that (i) have accounting profits of less than EUR 750,000 and non-trading income of less than EUR 75,000, or (ii) have accounting profits of no more than 10% of operating costs for the tax period.

Cyprus has long applied the arm’s-length principle to transactions between connected persons under Article 33 of the Income Tax Law. The transfer pricing framework was significantly expanded with effect from 1 January 2022 through the introduction of formal transfer pricing documentation and reporting requirements.

In accordance with Article 33 of the Income Tax Law, the arm’s length principle applies to commercial or financial transactions between enterprises which are related through direct or indirect participation in their management, control or capital, or where the same persons participate directly or indirectly in the management, control or capital of two or more enterprises. Where, in the context of such transactions, terms are imposed that differ from those that would have been imposed between independent entities, any profits or benefits which would have been gained without such terms may be included in the taxable profits of the relevant entity.

Connected persons, as understood under the Cyprus Income Tax Law, that are tax resident in Cyprus or have permanent establishment in Cyprus but are tax resident abroad, must maintain adequate evidence to support the arm’s length nature of intra-group transactions. In particular, all taxpayers engaged in controlled transactions are required to complete and submit a summary information table (“SIT”) electronically alongside their tax return, which captures, on an aggregated basis per transaction category, a high-level overview of related-party transactions, including their type, nature and value.

Depending on the materiality of intra-group transactions, additional documentation may be required in the form of a Local File or a Master File. The Local File is entity-specific and focuses on the Cyprus company’s operations, including comprehensive functional and comparability analysis, descriptions of controlled transactions, intercompany agreements, the selection and justification of the most appropriate transfer pricing method, benchmarking evidence and conclusions on arm’s length results. Following recent reforms effective as of 1 January 2026, the Local File thresholds are now as follows: EUR 5 million for sales of goods transactions, EUR 10 million for financing transactions, and EUR 2.5 million for all other transactions, including IP royalties and intra-group services.

The Master File, in contrast, provides a group-wide, high-level overview of the multinational enterprise, including the overall organizational structure, global business operations, IP portfolio, intra-group financing and transfer pricing policies. It is required only if the group’s consolidated revenues exceed EUR 750 million and a Cyprus company qualifies as the Ultimate Parent Entity or Surrogate Parent Entity within the meaning of the relevant legislation. While the Master File is more strategic and policy-focused, the Local File provides the transactional detail necessary to justify the pricing of potential licensing or other intra-group service charges.

Additionally, on the 06 July 2023, the Cyprus Tax Department released a circular providing guidance to persons that are exempt from maintaining a Local Cyprus file as to minimum transfer pricing documentation required for related party-controlled transactions.

The minimum transfer pricing documentation requirements for transactions not exceeding the annual thresholds are as follows:

• functional analysis;
• characterization of the entity;
• selection of the most appropriate transfer pricing method; and
• benchmark study.

Furthermore, the Circular provides for simplification measures for controlled transactions involving (i) back-to-back financing, (ii) financing (received or provided), and (iii) low value-added services. The simplification measures cannot be applied if internal comparables can be used.

The applicable simplification rates, which will be reviewed periodically by the Cyprus Tax Department, are the following:

• a minimum pre-tax net return of 2.5% on the average of the outstanding receivable balance of back-to-back financing arrangements;
• a pre-tax interest rate equal to the ten-year governmental bond yield rate of the operational jurisdiction of the borrower plus 3.5% for financing by a Cyprus tax resident person to a related party;
• a pre-tax interest rate equal or less than the ten-year government bond yield rate of the Republic of Cyprus plus 1.5% for financing received by a Cyprus tax resident person from a related party; and
• a 5% markup on costs for low value adding services being provided and in relation to receipt of such services, the profit mark-up on costs of 5% is considered as the maximum profit margin.

All persons applying the simplification measures will need to have the relevant supporting documentation in place.

While Cyprus does not have a statutory thin-capitalization regime, Article 11(16)(a) of the Income Tax Law, which implements Article 4 of Directive (EU) 2016/1164 (“ATAD”), provides for an interest limitation rule. Under this rule, a company’s exceeding borrowing costs are not deductible to the extent that they exceed thirty per cent (30%) of its taxable earnings before interest, tax, depreciation and amortization (“EBITDA”). For these purposes, EBITDA is calculated by adding back to taxable income the exceeding borrowing costs and the relevant tax deductions, allowances and add-backs relating to fixed and intangible assets. Exempt income and losses carried forward from previous years are disregarded in determining EBITDA.

The provisions governing the interest limitation rule apply to companies that are tax resident in the Republic of Cyprus and to permanent establishments in Cyprus of companies that are not tax resident in Cyprus. Stand-alone entities and financial institutions, as defined in the Income Tax Law, are excluded from the scope of the interest limitation rule under Article 11(16). A company is regarded as a stand-alone entity where it is not part of a consolidated group for accounting purposes and has neither a connected enterprise (participation of ≥ 25% in the capital or voting rights or profits) nor a permanent establishment. Further exclusions apply to exceeding borrowing costs arising from certain loans concluded before 17 June 2016, although not to subsequent amendments to such loans, and from certain loans used to finance qualifying long-term public infrastructure projects within the European Union.

A de minimis threshold also applies, pursuant to which exceeding borrowing costs of up to EUR 3 million per tax year remain deductible, irrespective of the 30% interest limitation rule. Where a company forms part of a Cyprus group, the interest limitation rule is applied by reference to the aggregate position of that Cyprus group, with the EUR 3 million threshold applying at group level rather than separately to each member.

In addition, a company forming part of a consolidated group for accounting purposes may elect for a full deduction of its exceeding borrowing costs where its equity-to-total-assets ratio is broadly in line with that of the consolidated group. The condition is satisfied where the company’s ratio is equal to or higher than the group ratio, or is no more than two percentage points lower, provided that assets and liabilities are valued on a consistent basis.

Exceeding borrowing costs that are not deductible in the year in which they arise may be carried forward for up to five years, subject to the interest limitation rule applicable in the relevant future year. Any unused interest capacity may likewise be carried forward for five years. However, in determining such unused capacity, the EUR 3 million threshold shall be disregarded and only the capacity arising under the 30% EBITDA limitation is taken into account.

These carry-forward provisions are subject to specific restrictions in the event of certain changes in ownership. In particular, amounts arising before a change in ownership may not be carried forward where the change is accompanied by a material change in the nature of the company’s business, or where the scale of the company’s activities has become small or negligible and the change in ownership occurs before any material reactivation of the business. Where the company was a member of a Cyprus group, the relevant change in ownership must also result in the company ceasing to be a member of that group.

With effect from 1^st of January 2022, with the passing of Law No. 101 (I)/2022, connected persons who are tax residents of the Republic, or who have a permanent establishment in the Republic and are not tax residents in the Republic may apply for an advance ruling for the pre-approval of the transfer pricing methodology for controlled transactions that are either in progress or that are to be carried out in the future. This procedure is governed under Regulatory Administrative Act 273/2022 (“KDP273/2022”). The subject matter of the advance ruling is the appropriate set of criteria used to determine transfer prices during a specific time period, which includes in particular the method used to document controlled transactions, the comparables or benchmarks and the relevant adjustments to controlled transactions, as well as the key assumptions regarding the business profile and market conditions.

The Tax Commissioner reviews the application for prior approval of a transfer pricing methodology for controlled transactions and either accepts or rejects it within ten (10) months from the date of its submission, which may be extended by way of notice to the applicant to up to twenty-four (24) months from the application’s submission. The term of validity of the decision may not exceed four (4) years, and its validity may not extend to the tax year that has already elapsed at the time of submission of the application. Where the application also involves a request for consultation with competent tax authorities of other participating countries with which a Double Tax Treaty exists, the applicant shall simultaneously submit an application to the tax authorities of the other involved countries, including the same information.

An advance ruling is binding and may only be revised during its term of validity, either upon request by the interested party or on the Commissioner’s own initiative, in the following cases: (i) the critical assumptions on which the preliminary approval decision was based prove to be incorrect, (ii) there has been a material change in the critical assumptions or conditions, rendering it impossible to comply with the terms set forth in the preliminary approval decision, or (iii) the application of the mutual agreement procedure under the applicable bilateral double tax treaty or the European Convention on the Elimination of Double Taxation in the event of an adjustment of the profits of connected enterprises for the same transactions of the same taxpayer. An advance ruling may be revoked where it is determined that the data or critical assumptions on which the preliminary approval decision was based were inaccurate, due to misinterpretation or errors attributable to the taxpayer, or it is determined that the applicant failed to comply with a material condition or obligation included in the advance ruling. Following revocation, the APA is treated as if it had never been issued. Separately, such a decision may be cancelled, where it is determined that there has been a material change in the critical assumptions or conditions upon which the decision granting prior approval was based, it is determined that the connected persons have failed to comply with a material condition or obligation included in the advance approval decision or where there has been a material change in the applicable tax provisions that materially affects the advance ruling. Upon cancellation, the ruling ceases to have effect from the time specified in the cancellation decision. Cancellation is not permitted where revision of the ruling is possible.

In relation to GAARs, Cyprus has already incorporated the anti-avoidance provisions of the PSD GAAR into domestic law (effective as from 1 January 2016). It gave the tax authorities the power to disregard artificial or fictitious transactions and to withhold the corporate tax exemption on dividends received by companies in Cyprus from elsewhere in the EU if the dividend is treated as a tax-deductible expense in the accounts of the company paying it (so-called “hybrid mismatches”); such dividends will instead be taxed as normal business income at 15%.

On 05 April 2019, the House of Representatives approved legislation implementing the EU Anti-tax Avoidance Directive (2016/1164/EC) in Cyprus with the aim of improving the resilience of the internal market against cross-border tax avoidance practices.

The provisions relating to interest deductibility, controlled foreign company (CFC) rules and the general anti-abuse rules (GAARs) came into effect on 1 January 2019, with exit taxation and hybrid mismatch rules being phased in subsequently.

Transactions that are not carried out for valid commercial reasons will give rise to tax liability, which will be calculated in accordance with the Income Tax Law. Cyprus already incorporates within its tax legislation numerous anti-abuse rules. Following the 2026 tax reforms, further provisions have been amended and enhanced to provide greater powers to the Tax Department. Notably, the GAAR, which previously applied only to corporate transactions, has also been extended to individuals.

On the 22 January 2020, the MLI along with the positions of Cyprus and an explanatory statement, were published in the Official Gazette of the Republic. Cyprus approved the minimum actions as prescribed by the MLI to include Article 7 (Treaty Abuse).

Article 7 contains a general anti-abuse rule based on the principal purpose of transactions or arrangements (PPT). It also contains an option to supplement the PPT with a simplified limitation on benefits (LOB) provision. Most signatories to the MLI, including Cyprus, have opted for the PPT clause only. Cyprus has not made any notification as regards the adoption of the LOB provision.

The PPT effectively acts to deny treaty benefits if it is determined that the main reason of an arrangement or transaction was to obtain the treaty benefit. Persons to whom a treaty benefit is denied under the PPT may still be able to claim a treaty benefit, if, they can establish that obtaining the benefit would be in line with the object and purpose of a specific treaty provision (objective test).

Cyprus has chosen to apply Article 7(4) of the MLI in cases where the competent authority determines that such benefits would have been granted in the absence of the transaction or arrangement.

It should be noted that, as of yet, there are no relevant court decisions in Cyprus in the context of the PSD GAAR.

Cyprus has introduced a two-phase withholding tax regime on outbound payments to protect its tax base targeting dividend, interest and royalty payments made to associated entities in jurisdictions classified as either EU non-cooperative or low tax jurisdictions. Please refer to question 23 below for details as per the amended withholding tax regime.

An anti-avoidance provision has been inserted in the Cyprus Income Tax law whereby if a scheme or series of arrangements has been put in place for the principal purpose of obtaining a tax advantage and the arrangement is not put into effect for valid commercial reasons which reflect economic reality then the arrangement will be disregarded when considering royalty payments made to associated enterprises in low tax or non-cooperative jurisdictions as defined in the Cyprus Income Tax law. The GAAR provision relating to non-cooperative jurisdictions is governed by Ministerial Decree KDP 110/2025. Similarly, a further GAAR provision was inserted in the SDC Law whereby arrangements put in place for the principal purpose of obtaining a tax advantage can be disregarded for the purpose of payment of dividends to a non-cooperative or low tax jurisdiction and interest payments to non-cooperative jurisdictions. With respect to non-cooperative jurisdictions, the GAAR provision is regulated under Ministerial Decree KDP 109/2025.

Law 49(I)/2025 (amending The Tax Assessment and Collection Law of 1978 (Law 4/1978)) (TAC Law) introduces an obligation to retain appropriate supporting documentation for such payments and imposes penalties for non-compliance, while reinforcing anti-avoidance provisions. Furthermore, Cyprus must renegotiate tax treaties with these jurisdictions within three years of their classification as low-tax or EU non-cooperative. Both phases apply to permanent establishments.

Cyprus aligns its domestic GAAR framework with international standards, applying the “substance over form” and “business purpose” doctrines to both local and cross-border transactions. Through amendments to the TAC Law, in line with the EU Mutual Assistance Directive 77/799/EEC, Cyprus ensures that artificial or abusive arrangements can be disregarded. The jurisdiction actively participates in international information exchange frameworks and has restructured preferential regimes, including its IP Regime, to meet substance and anti-abuse criteria in line with the EU’s Intergovernmental Code of Conduct Group on Business Taxation (CoCG). These measures reinforce Cyprus’s commitment to granting treaty benefits only to genuine economic activities and strengthen its position as a fully cooperative and transparent tax jurisdiction.

Cyprus is not listed among the jurisdictions having an existing DST that would be subject to removal under the Convention.

Cyprus has implemented Pillar Two through Law 151(I)/2024, transposing Council Directive (EU) 2022/2523 and introducing the 15% global minimum tax for in-scope multinational and large domestic groups with consolidated revenues of at least EUR 750 million. The IIR applies for fiscal years beginning on or after 31 December 2023, while the UTPR forms part of the domestic Pillar Two framework.

The legislation broadly follows the OECD GloBE Rules and provides for OECD/G20 Inclusive Framework guidance to be taken into account in interpreting the Cyprus rules, subject to consistency with EU and domestic law.

The regime is still being refined. On 30 July 2026, the Ministry of Finance launched a public consultation on amendments to the Pillar Two legislation, open until 5 September 2026, aimed at addressing European Commission comments and further aligning Cyprus law with OECD guidance. The draft amendments also propose the application of a QDMTT from 1 January 2026.

The OECD/G20 BEPS program has had a significant impact on Cyprus tax policy. Cyprus has implemented a number of BEPS-related measures, including CFC rules, interest limitation rules, anti-hybrid provisions, transfer pricing documentation, country-by-country reporting and treaty anti-abuse measures through the MLI.

The Cyprus IP regime has also been aligned with the OECD nexus approach, while more recently Cyprus has implemented the Pillar Two global minimum tax framework for in-scope multinational and large domestic groups.

Overall, Cyprus has sought to maintain a competitive tax regime while ensuring alignment with OECD, EU and international standards on transparency, substance and anti-avoidance.

The Cyprus tax system is fully aligned with applicable EU legislation and international tax standards, including OECD initiatives. The principal categories of income are taxed as follows: 

Business profits. Business profits of companies, adjusted for applicable deductions, disallowances and exemptions, are subject to corporate income tax at 15% from 1 January 2026. The notional interest deduction (“NID”) on qualifying new equity remains available and may reduce taxable profits by up to 80%, resulting in a minimum effective corporate tax rate of approximately 3% where the maximum deduction is available. The Cyprus IP regime also remains in place, providing an 80% exemption on qualifying profits from qualifying IP assets, resulting in an effective tax rate of approximately 3%. 

Employment income and pensions. For individuals, the first EUR 22,000 of annual taxable income is tax free. Income from EUR 22,001 to EUR 32,000 is taxed at 20%, EUR 32,001 to EUR 42,000 at 25%, EUR 42,001 to EUR 72,000 at 30%, and income exceeding EUR 72,000 at 35%.

Employment income exemptions remain available to qualifying individuals taking up employment in Cyprus, including the 50% exemption applicable subject to the relevant conditions.

A Cyprus-source widow’s or widower’s pension may, at the taxpayer’s option, be taxed separately at 20% on the amount exceeding EUR 22,000. Qualifying foreign pension income may similarly be taxed separately at 5% on the amount exceeding EUR 5,000 per year. In either case, the taxpayer may elect instead for taxation under the ordinary income tax rates where this is more beneficial.

VAT. The standard rate of VAT is 19%, with reduced rates, including 5% and 9%, and zero-rating applying to specified supplies in accordance with the VAT legislation. Certain basic goods are also temporarily subject to a zero rate during 2026 pursuant to specific measures.

Interest, dividends and royalties. Dividends received by Cyprus tax resident and domiciled individuals are generally subject to Special Defence Contribution (“SDC”) at 5% in respect of profits arising from 1 January 2026. Cyprus tax resident individuals who are non-domiciled remain generally exempt from SDC on dividend and interest income. Interest received by individuals is generally subject to SDC at 17%, subject to applicable exemptions and reduced rates.

Interest received by Cyprus tax resident companies is no longer subject to SDC and is instead treated under the ordinary corporate income tax rules. Dividends received by Cyprus tax resident companies are generally exempt from corporate income tax, subject to the applicable anti-avoidance and SDC provisions. Royalties are generally taxable as business income, although qualifying IP income may benefit from the IP regime.

Income from land. Rental income is subject to income tax or corporate income tax, as applicable, after the deductions permitted by law. Individuals continue to benefit from the applicable statutory deduction in computing taxable rental income. From 1 January 2026, rental income is no longer subject to SDC. Rental income received by individuals may nevertheless remain subject to GHS contributions, where applicable. 

Capital gains. Capital Gains Tax (“CGT”) is imposed at 20% principally on gains from the disposal of immovable property situated in Cyprus,  the disposal of shares in companies holding such immovable property, and the disposal of shares in companies indirectly holding such immovable property, where the prescribed proportion of the value of the shares disposed of is derived from the underlying Cyprus immovable property. From 1 January 2026, the relevant threshold for indirectly held property-rich companies has been reduced from 50% to 20%. Gains from the disposal of other securities generally remain outside the scope of CGT, subject to the detailed statutory rules. 

Stamp duty. The Stamp Duty Law has been abolished with effect from 1 January 2026. Accordingly, no Cyprus stamp duty is generally payable on contracts and other documents executed on or after that date, subject to transitional rules and certain court-related fees which remain separately applicable.

Inheritance tax. Cyprus does not impose inheritance or estate tax.

GHS contribution. The GHS remains funded through compulsory contributions. The principal rates remain:

For individuals, GHS contributions can also apply to certain non-employment income, including dividends, interest and rental income, subject to the applicable statutory limits and exemptions. Rental income, for example, remains subject to GHS at 2.65% even though SDC on rents has been abolished.

The charge to tax is based on profits computed according to International Financial Reporting Standards, adjusted to reflect exempt income and disallowable expenditure according to the Income Tax Law.

While Cyprus recognises a wide range of business structures, including all of the above, only natural and legal persons (individuals, companies and their branches and PEs as well as foundations) are treated as taxable entities. Partnerships and trusts are treated as transparent for tax purposes and the income is assessed on the partners and the beneficiaries, respectively.

Please refer to question 8 above.

Tonnage Tax

The Merchant Shipping (Fees and Taxing Provisions) Law of 2010, commonly known as the Tonnage Tax Law, provides shipowners, ship managers and charters that qualify under the said law in relation to qualifying ships (as defined in the law) engaged in qualifying shipping activities (as defined in the law) the possibility to be taxed on the basis of the tonnage of the vessel (not all gains nor all activities can fall within the tonnage tax system). It should be noted that following the Government’s negotiations with the EU, the tonnage tax system of Cyprus has been prolonged until 31 December 2029, giving effect to the Decision of the European Commission dated 16 December 2019 to prolong the Cyprus tonnage tax system and to approve it as being in line with the relevant EU policy and community guidelines on state aid to maritime transport. 

Film and audio-visual production industry

In September 2017, the Cyprus government approved an initiative to encourage the development of the film and audio-visual production industry in Cyprus by means of grants, tax incentives, and other assistance.

Law 139(I) of 2018, which took effect on 11 December 2018, amends the Income Tax Law to provide tax exemption of income from production of films and audio-visual media in accordance with the government’s program.

The amending law adds a new sub-paragraph to Article 8 of the Income Tax Law providing up to 50% exemption from tax of income derived from production of films, series and other relevant audio-visual programs as described in the government program. The deduction is limited to 35% of the eligible costs approved by the competent authority implementing the program. Any restriction on the exemption resulting from the limitation to 35% of costs can be recovered over the next five years. No exemption is available if the taxpayer has received a grant under the program.

In addition, small enterprises as defined in Article 17 of Regulation (EU) 651/2014 may claim an annual deduction of 20% of the cost of cinematographic infrastructure and technological equipment providing it is used in Cyprus for at least five years. Medium-sized enterprises may claim an annual deduction of 10% of such costs.

Yes. Cyprus operates an IP regime which is aligned with the OECD modified nexus approach under BEPS Action 5.

The regime applies to qualifying intellectual property, principally patents, copyrighted software and other qualifying legally protected IP, but excludes marketing-related intellectual property such as trademarks, brands, business names and image rights.

The regime provides an 80% exemption on qualifying profits derived from qualifying IP assets. The amount eligible for the exemption is determined by reference to the proportion of qualifying research and development expenditure incurred by the taxpayer in developing the relevant IP. Acquisition costs, financing costs and certain expenditure incurred with related parties are generally excluded from qualifying expenditure.

Following the increase in the Cyprus corporate income tax rate to 15% from 1 January 2026, the regime can result in an effective tax rate of approximately 3% on qualifying IP profits.

Cyprus does not operate a fiscal consolidation regime under which a group is taxed as a single entity. Each company is taxed separately. However, group relief is available, allowing trading losses of one group company to be surrendered against the taxable trading profits of another group company, generally where the losses and profits arise in the same tax year.

Two companies are treated as members of the same group where one is a 75% subsidiary of the other, or both are 75% subsidiaries of a third company. The 75% test requires the relevant ownership, voting and economic entitlement conditions to be satisfied. As a general rule, the companies must be members of the same group throughout the relevant tax year, although special rules apply to newly incorporated companies.

Group relief is also available, subject to conditions, for certain losses of subsidiaries resident in another EU Member State, where the foreign subsidiary has exhausted the possibilities of utilising those losses in its jurisdiction of residence, in accordance with the principles established in Marks & Spencer (C-446/03). Similar relief may be available in respect of subsidiaries resident in jurisdictions with which Cyprus has an applicable double tax treaty or tax information exchange arrangement, subject to the statutory conditions. Foreign losses surrendered are recalculated in accordance with Cyprus tax rules.

Following the 2026 tax reform, unutilised tax losses may generally be carried forward for seven years, increased from the previous five-year period.

Cyprus generally does not impose withholding tax on dividends, interest or royalties paid to non-residents. This remains one of the principal features of the Cyprus tax regime.

There are, however, important exceptions. Payments to associated companies in EU non-cooperative jurisdictions may be subject to withholding tax, including 17% on dividends and interest and 10% on royalties, subject to the detailed statutory conditions. In addition, from 2026, dividends paid to an associated company in a low-tax jurisdiction are subject to 5% withholding tax where the relevant ownership threshold is met.

Cyprus also operates withholding mechanisms in other contexts, including PAYE on employment income and SDC withholding on certain payments to Cyprus tax resident and domiciled individuals.

Accordingly, the general position remains that outbound dividends, interest and royalties to non-residents are paid without Cyprus withholding tax, subject principally to the defensive measures applying to associated entities in non-cooperative or low-tax jurisdictions.

Cyprus does not currently operate a separate general environmental tax credit regime for businesses. Businesses may, however, be subject to environmental charges through existing measures such as fuel excise duties, waste-related charges and other sector-specific environmental levies, depending on their activities.

Cyprus had also committed under its Recovery and Resilience Plan to introduce a broader green taxation framework, including a carbon tax on fuels used outside the EU Emissions Trading System, a water levy reflecting scarcity and environmental cost, and a nationwide landfill/waste charge.

However, the Government announced in March 2026 that the proposed green tax on fuels would not be imposed, principally to avoid an additional increase in fuel costs.

There are nevertheless various grants, subsidies and ordinary tax deductions/allowances supporting energy efficiency, renewable energy and other environmentally beneficial investments. These should be distinguished from a specific environmental tax credit, which Cyprus does not presently provide as a general feature of its corporate tax system.

Dividends received by a Cyprus tax resident company are generally exempt from Cyprus taxation, subject to limited exceptions.

Test 1: Corporate income tax at 15% where the foreign dividend is deductible for the payer

Dividends received by a Cyprus tax resident company are generally exempt from corporate income tax. However, where a foreign dividend is deductible for tax purposes by the paying company, for example because of a hybrid mismatch, the exemption does not apply and the dividend is subject to Cyprus corporate income tax at 15%.

Test 2: SDC at 5% on certain foreign dividends

Where the dividend is not subject to corporate income tax, foreign dividends are generally exempt from SDC. The exemption is denied where both of the following conditions are met:

• more than 50% of the activities of the foreign paying company result directly or indirectly in investment income; and
• the foreign tax burden on the paying company is less than 50% of the corresponding Cyprus tax burden.

Where both conditions are satisfied, the dividend is subject to SDC at 5% from 1 January 2026, reduced from the previous 17% rate.

Dividends received by a Cyprus tax resident company from another Cyprus tax resident company remain generally exempt, although transitional SDC rules continue to apply in limited cases to dividends deriving from profits earned up to 31 December 2025.

Cyprus offers a number of advantages to international groups seeking to establish or relocate activities within the EU. Its tax regime includes a 15% corporate income tax rate, an extensive double tax treaty network, an OECD-compliant IP regime, a notional interest deduction on qualifying new equity, and exemptions for qualifying dividend income and gains from the disposal of securities.

The jurisdiction also offers incentives for attracting senior personnel. In particular, qualifying individuals taking up employment in Cyprus may benefit from a 50% exemption from income tax on employment remuneration exceeding EUR 55,000 for up to 17 years, subject to the statutory conditions.

From an operational perspective, Cyprus combines EU market access with an English-law influenced legal system, widespread use of English in business and an established professional services sector. The Government has also introduced a framework for Companies with Foreign Interests, under which qualifying businesses relocating or expanding operations in Cyprus may employ highly paid third-country nationals without a labour-market test, subject to the applicable immigration requirements.

The Business Support Center, incorporating the functions previously associated with the Business Facilitation Unit, provides a central point of contact for businesses establishing or expanding operations in Cyprus and assists in navigating relevant registration, licensing and governmental procedures.

Potential disadvantages include the relatively small size of the domestic market and labour pool.

Overall, Cyprus can provide an attractive base for regional headquarters and internationally focused business operations, particularly where the group intends to establish substantive management and business functions in the jurisdiction.