Cyprus remains one of the most appealing destinations for business setup, offering low corporate tax rates, favourable conditions for non-residents, transparent legal and tax regulations, and a straightforward, efficient company registration process.
At the same time, Cyprus is not an offshore jurisdiction. It’s an EU Member State that has implemented BEPS/OECD standards and complies with EU directives (including AML/KYC).
Add to this an extensive double-tax treaty network, mature financial and legal services, and a strategic location that bridges Europe, the Middle East, and Africa, and you have a compelling base for companies aiming to scale internationally.
In this guide, we answer the core question: What taxes apply in Cyprus? With practical calculation examples and an overview of preferential regimes available to businesses.
Cyprus tax system
Cyprus offers one of the most attractive tax systems in Europe, combining low rates with generous exemptions. The CIT is 12.5%, while dividends for both residents and non-residents are often exempt from taxation. Individuals with Non-Dom (non-domiciled) status are not subject to tax on dividends, interest, or royalties. The PIT is progressive, ranging from 0% to 35%. The standard VAT rate is 19%, with reduced rates available for specific categories of goods and services. Businesses also pay a one-time registration fee of around €100–150 when incorporating a company in Cyprus —a minor expense in the overall startup cost, but one that should be considered alongside registrar services, accounting setup, and initial KYC procedures.
Current tax in Cyprus for 2026 (summary)
Corporate income tax | 12.5% on company profits is one of the lowest rates in the EU. |
Dividends | 0% for non-residents 17% for resident individuals 0% for Non-Dom residents (non-domiciled status) |
VAT (Value Added Tax) | 19%—standard rate 5% applies to food, pharmaceuticals, and certain other goods and services 3% for selected goods and services 0% for residential rental and financial services |
PIT | 0% for annual income up to €19,500 20% for annual income €19,501–28,000 25% for annual income €28,001–36,300 30% for annual income €36,301–60,000 35% for annual income €60,001 and above |
IP BOX regime. | 2.5% tax rate on qualified intellectual property income under the Cyprus IP Box regime. |
Corporate Income Tax in Cyprus
The corporate income tax in Cyprus is 12.5%, one of the lowest in the European Union. It paid through advance installments during the year, with the final settlement made after filing the annual corporate tax return. The tax year coincides with the calendar year.
Every company must also submit an annual return with basic corporate details, including shareholders, directors, and the registered office address. Financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS), which requires the services of a local licensed Cypriot accountant.
Cyprus Intellectual Property (IP) Box regime
Cyprus has introduced a dedicated IP Box regime aimed at promoting innovation and the creation of intellectual property assets.
Its core benefit lies in the reduced effective tax rate applied to profits generated from eligible IP rights.
The incentive covers income derived from patents, software, copyrights, and other qualified IP assets that are developed or enhanced by the company itself. Under this regime, 80% of the qualifying income is exempt from taxation, resulting in an effective tax rate of roughly 2.5%, which is significantly lower than the standard 12.5% corporate rate.
The Cypriot IP Box framework fully aligns with the OECD Nexus Approach, which requires companies to demonstrate fundamental R&D or development activity directly connected to the IP asset to benefit from the regime. Any income not meeting these criteria is taxed under the standard corporate income tax rules.
We’ve gathered everything that matters in one guide: jurisdictions, taxes, payment systems, and the most common mistakes entrepreneurs face when entering new markets.
Dividend Tax (PIT) in Cyprus
When dividends are paid to shareholders, the taxation depends on the recipient’s residency status: Non-residents are fully exempt from dividend tax in Cyprus. Residents are subject to a 17% Special Defence Contribution (SDC). However, a Cypriot tax resident may obtain Non-Domiciled (Non-Dom) status, which grants a complete exemption from taxes on dividends, interest, and royalties. This makes the Non-Dom regime one of the most advantageous tax models for investors and business owners operating through Cyprus.
- They spend at least 183 days in Cyprus during a calendar year; or
- They spend at least 60 days in Cyprus during the year, provided that: they do not stay more than 183 days in any other country, they are not considered a tax resident of another country, they maintain a permanent home in Cyprus (owned or rented), and they work in Cyprus or own or manage a Cypriot company.
VAT in Cyprus
Cyprus applies a VAT system aligned with the EU model and regulated by EU VAT Directives. You can read more about the general VAT framework in our regulated by EU VAT Directives.article on EU VAT rules.
VAT registration in Cyprus becomes mandatory when a company’s annual turnover exceeds €15,600. However, companies registered for VAT are entitled to recover input VAT on business-related expenses.
Therefore, in some cases, voluntary VAT registration, even before reaching the threshold—can be beneficial or recommended, especially for companies expecting business-to-business transactions or significant start-up expenses. Designing the right tax model for Cyprus begins with your revenue profile, activity type, and owners’ tax residency, then layers on one-off fees and baseline rates. Tech companies can unlock additional savings through the IP Box; investors may benefit from Non-Dom status, and service businesses should establish the correct VAT position (B2B/B2C, place-of-supply rules) to optimize cash flow.
Cyprus blends EU-level transparency with competitive rates: 12.5% CIT, flexible dividend taxation based on residency, a standard VAT of 19% with the option for voluntary registration, and an IP Box regime with an effective ~2.5% on qualifying profits. The correct configuration gives you a head start and reduces tax risk as you scale across Europe, the Middle East, and Africa.
Want a structure tailored to your case and clear guidance on Cyprus taxes? Write to us and we will design the model, prepare the documents, open accounts, and set up your accounting. Think big. Expand fast. Without borders.
