Corporate Tax in Cyprus (2026 Guide)
Low tax rates
Tax deductions
Tax exemptions
Losses carried forward
Cyprus has long been one of the most tax-efficient places in the European Union to run a company, and even after the 2026 tax reform it remains highly competitive. As of 1 January 2026, the corporate income tax rate in Cyprus is 15% (increased from 12.5%). Combined with a wide range of exemptions, deductions and special regimes, the effective tax burden for a well-structured Cyprus company can still be far lower than in most of Europe.
This guide explains how corporate tax in Cyprus works in 2026: the rate, who pays it, how it is calculated, and the exemptions and reliefs available. It also covers how KTC helps companies stay compliant and tax-efficient.
What Is the Corporate Tax Rate in Cyprus in 2026?
The standard corporate income tax rate in Cyprus is 15%, effective from 1 January 2026 (previously 12.5%). The rate applies to the taxable profits of Cyprus tax-resident companies.
Despite the increase, Cyprus stays one of the lower corporate tax jurisdictions in the EU, and the headline rate tells only part of the story. Dividends, gains on the sale of securities and several other income types are exempt, while reliefs such as the Notional Interest Deduction and the IP Box regime can reduce the effective rate substantially.
Who Pays Corporate Tax in Cyprus?
Corporate tax applies to companies that are tax resident in Cyprus. A company is considered Cyprus tax resident if:
- it is managed and controlled from Cyprus; or
- (from 2026) it is incorporated in Cyprus. Cyprus-incorporated companies are now deemed tax resident unless they are tax resident in another jurisdiction.
Cyprus tax-resident companies are taxed on their worldwide income. Non-resident companies are taxed only on income arising from a permanent establishment in Cyprus and on certain Cyprus-source income.
How Corporate Tax Is Calculated
Corporate tax is charged on taxable profit, not accounting profit. The starting point is the company’s profit per its financial statements, adjusted for tax purposes:
- Allowable expenses. Costs incurred wholly and exclusively for the production of income are deductible.
- Disallowable expenses. Private expenditure, most entertainment above set limits, and certain provisions are added back.
- Exempt income. Items such as dividends and gains on securities are removed (see below).
The 15% rate is then applied to the resulting taxable profit.
Corporate Tax Exemptions in Cyprus
Several categories of income are exempt from Cyprus corporate tax, which is a key reason the effective rate is often well below 15%:
- Dividend income. Generally exempt, subject to anti-avoidance conditions.
- Profit from the disposal of securities. Gains on shares, bonds and similar instruments are fully exempt.
- Foreign exchange (FX) gains. Exempt, unless arising from trading in foreign currencies.
- Profits of a foreign permanent establishment. Exempt under conditions.
Deductions & Reliefs That Lower Your Effective Rate
- Notional Interest Deduction (NID). Companies can claim a notional deduction on new equity introduced into the business, reducing taxable profit.
- IP Box regime. Qualifying profits from intellectual property benefit from an 80% exemption, bringing the effective tax rate on that income as low as roughly 2.5%. See our IP Box Cyprus guide.
- Losses carried forward. Tax losses can be carried forward and offset against profits for up to 5 years.
- Group relief. Losses can be surrendered between qualifying Cyprus group companies.
- Donations, R&D and other deductions. Available subject to conditions.
Special Regimes Worth Knowing
- IP Box, for software, patents and qualifying IP. See Cyprus IP Box Regime.
- Tonnage Tax System, for qualifying shipping companies.
- Non-Dom status (for shareholders). Cyprus non-domiciled individuals receive dividends free of Special Defence Contribution, so company profits can be distributed to owners highly tax-efficiently. See Cyprus Non-Dom Status.
Cyprus Tax Reform 2026: What Changed for Companies
The 2026 reform brought several changes relevant to companies, most notably:
- Corporate income tax rate increased from 12.5% to 15%.
- Cyprus-incorporated companies are now deemed tax resident unless resident elsewhere.
For the full set of corporate and personal changes, see our Cyprus Tax Reform 2026 guide.
How KTC Helps With Corporate Tax in Cyprus
KTC Business Consultants handles corporate tax for companies of every size, from compliance and annual filings to structuring and planning that keeps your effective rate as low as the law allows. Our team manages tax registration, computations, returns and deadlines, and advises on the exemptions, NID, IP Box and group relief that apply to your business. Paired with our bookkeeping Cyprus services, your records stay accurate and audit-ready all year.
FAQ About Corporate Tax in Cyprus.
The corporate income tax rate in Cyprus is 15%, effective from 1 January 2026 (up from 12.5%).
Any Cyprus registered entity (Tax resident company) has to pay tax in Cyprus.
No there is not. All Cyprus companies are taxed on 15% on their profits.
Yes. Corporate tax exemptions apply. Check the table below.
Corporate Tax exemptions.
| Type of income | Exemptions |
|---|---|
| Dividents | Whole amount |
| Profit from the sale of securities | Whole amount |
| Interest not arising from the usual activities or closely related to the ordinary activities of the company | Whole amount |
| Gains related to foreign exchange differences (forex) with the exception of forex arising from trading in foreign currencies and related derivatives | Whole amount |
| Profits of a foreign permanent establishment, under certain conditions | Whole amount |
| Benefits, profits or redundant obtained from restructuring | Whole amount |
Any expenses incurred wholly and exclusively in earning (taxable) income are deducted for corporate tax purposes.
| Type of expense | Deduction |
|---|---|
| Interest expense incurred for the direct or indirect acquisition of 100% of the share capital of a subsidiary company will be treated as deductible for income tax purposes provided that the 100% subsidiary company does not own (directly or indirectly) any assets not used in the business. If the subsidiary owns (directly or indirectly) assets not used in the business, the interest expense deduction is restricted to the amount which relates to assets used in the business. | Whole amount |
| Equity introduced to a company as from 1 of January 2015 (new equity) in the form of paid up share capital or share premium is eligible for an annual notional interest deduction (NID). The annual NID deduction is calculated as an interest rate on the new equity. The relevant interest rate is the yield on 10 year government bonds (as at December 31 of the prior tax year) of the country where funds are employed in the business of the company plus a 3% premium (subject to a minimum amount which is the yield on the 10 year Cyprus government bond as the same date plus a 3% premium). |
The NID deduction cannot exceed the 80% of taxable profit derived from assets financed by new equity (as calculated prior to the NID deduction) |
| Donations to approved charities (with receipts) | Whole amount |
| Royalty income, embedded income and other qualifying intangible assets according to the “new” Cyprus regime (1 July 2016) | 80% of the net profit as calculated in accordance with the “new” regime |
| Royalty income, embedded income and other qualifying income derived from qualifying intangible assets according to the “old” Cyprus IP box. | 80% of the net profit |
| Expenses for scientific researches including research for development that is carried out from small-middle size enterprises. | Whole amount |
| Employer’s contributions to social insurance and approved funds on employees’s salaries. | Whole amount |
| Employer’s contributions to medical funds from employees. | 1% on employee’s remunaration |
| Employer’s contributions to Provident/Pension funds for employees. | Up to 10% on employee’s remunaration |
| Entertainment expenses for business purposes. | The lower amount of €17.086 or 1% on the gross company income |
| Type of expense | No deduction |
|---|---|
| Expenses the purpose of which was not the acquiring of income | Whole amount |
| Private car expenses | Whole amount |
| Interest applicable to the cost of acquiring a private vehicle regardless the use and on other assets that were not used for establishment purposes. | Whole amount for 7 years since the day of acquiring the relevant asset. |
| Salaries provided within a tax year, and of which the contributions to social insurance or other approved funds were not paid within the same year. | Whole amount |
Entities like non-profit organizations or Intellectual property Holdings may be treated or benefit from other tax approaches.
The tax loss occurred after a tax year and which cannot be set off against other income, is carried forward subject to conditions and is set off against the profits of the next five years.
Loses from permanent establishments abroad can be set off with profits of the company in Cyprus. Subsequent profits of an exempt permanent establishment abroad are taxable up to the amount of losses allowed.
Yes, you can download our free Cyprus Corporate Tax guide in our Library section.
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