Quick Summary
Cyprus has long been considered one of the best destinations for the establishment of holding companies. And 2026 can be called a critical turning point since the Cypriot government implemented its biggest tax overhaul in 20 years. Yet, despite all changes, it did not become less attractive. Let us
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FAQ :
The key changes effective from January 1, 2026, include an increase in the corporate income tax rate from 12.5% to 15%, the abolition of Deemed Dividend Distribution (DDD), a decrease in the Special Defence Contribution (SDC) on dividends paid to resident beneficiaries, and an expansion of the tax loss carry-forward period to 7 years. Stamp duty on commercial activities was also abolished, and the super-deduction rate for R&D expenses increased to 120%.
The participation exemption scheme, which exempts dividends and capital gains from tax for residents, remains untouched. Dividends and other income paid to foreign non-residents continue to be tax-free. The Cyprus Double Tax Treaty network, comprising over 65 treaties, is also unaffected, as is the IP box regime offering a 2.5% effective tax rate on IP income.
As of April 2, 2026, Cyprus requires pre-completion notification for investments in strategically significant industries, including infrastructure, technology, and supply chains. Investors acquiring stakes in companies within these sectors must notify authorities in advance and may need to provide documentation on ownership structure, finance sources, and deal terms.
The enforcement of economic substance requirements has become stricter. Cyprus-based companies must now be prepared to prove their genuine existence with local directors, regular board meetings, and local accounting, rather than relying on paper-only structures.
Practical advice includes separating earnings by date to track applicable tax regimes, reviewing dividend distribution strategies, being aware of the new tax criterion for gains on property sales (20% vs. 50%), maintaining updated corporate documentation, and engaging experts in international taxation and compliance.
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