Tax reform in Cyprus in 2026: a plain-language explanation for owners of international companies

24.02.2026

Cyprus remains one of the key European jurisdictions for holding and investment structures. However, the tax reform that entered into force in 2026 noticeably changes the rules of the game for companies operating in several countries.

For business owners, this is not so much about an increase in the tax rate as it is the need to review:

• the architecture of international assets,

• dividend flows,

• ownership models,

• cross-border transactions,

• tax residence and economic substance.

In this overview, we explain the key changes and show where legal support becomes critically important.

Increase in corporate income tax — now 15%

The main change is an increase in corporate income tax from 12.5% to 15%. Nevertheless, this is still lower than in many EU countries.

For comparison:

• Germany — around 30% total tax burden;

• France — around 25%;

• the Netherlands — up to 25.8%.

Withholding tax on outbound dividend payments

The reform introduced withholding tax in certain cases:

• 5% — if dividends are paid to countries with a very low corporate tax. Such jurisdictions are considered to be those where the corporate tax rate is less than 50% of the corporate tax rate in Cyprus, i.e. less than 7.5%.

• 17% — if the recipient is located in a jurisdiction from the EU list of non-cooperative jurisdictions (the EU blacklist — https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/);

• 0% — remains for most non-residents, including EU countries.

Why this matters

Previously, entrepreneurs often built chains through offshore companies. Now such structures may become more expensive.

Example

If a Cypriot company pays dividends to a company in the UAE or the EU, the tax may be 0%. If the payments go to a “classic” offshore with minimal taxation, a 5% withholding may apply; for the British Virgin Islands, the withholding will be 17%.

Changes to the tax on passive income

The reform changed the approach to dividends and rent:

• the deemed distribution of profits rule has been abolished — the company is no longer obliged to pay tax merely because profits have been accumulated;

• the tax on actual (paid) dividends has been reduced to 5%;

• the tax on rental income within this regime has been abolished.

This makes Cyprus more convenient for real estate owners and investment companies.

Example

Previously, an owner could face tax even if money was not extracted from the business. Now tax arises only upon an actual payment.

Transactions between your own companies: fewer documents, but the same rules

The thresholds at which detailed documentation is required for intra-group transactions have been increased:

• financial transactions — up to EUR 10 million;

• trade in goods — up to EUR 5 million;

• services — up to EUR 2.5 million.

This reduces the administrative burden, especially for family groups.

By comparison, in Germany and Italy the documentation requirements are often stricter even at lower turnovers.

Tax on the sale of real estate through a company

Previously, tax arose if more than 50% of a company’s value consisted of real estate in Cyprus. Now the threshold has been reduced to 20%.

Example

If you sell shares in a foreign company and it holds Cypriot real estate within its structure, tax may arise even upon an indirect sale.

This is important for investors holding:

• hotels,

• residential complexes,

• commercial property through holding structures.

Other changes to take into account

The reform also includes additional measures:

• loss carry-forward — up to 7 years;

• income from crypto-assets — tax of around 8%;

• allowable business entertainment expenses have been increased;

• certain stamp duties have been abolished.

Compared with Spain or Italy, where taxes on digital assets can reach 20–30%, the Cypriot approach remains relatively mild.

Increased scrutiny and new requirements

The state is strengthening control over structures without real activity:

• a Cypriot company is considered a tax resident by default;

• more attention is paid to economic substance;

• the powers of the tax authorities have been expanded.

This means “paper” holding companies are becoming less safe.

Author: Anna Miritskaya.

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How we can help a business owner

The changes do not mean that you need to close a Cypriot company or relocate your business. In most cases, it is sufficient to set up the structure correctly.

As an international law firm, REVERA deals precisely with such tasks.

Analysis of your current structure

We check:

1. where the new 5% or 17% tax arises;

2. how secure the ownership chain is;

3. whether there is a risk of recharacterisation of payments.

Example

An entrepreneur owns an IT company through Cyprus and the UAE. After the reform, we change the procedure for dividend payments — and the structure retains a zero withholding tax.

Restructuring holding models

We help to:

1. change the ownership structure for real estate;

2. redistribute functions between companies;

3. reduce the tax burden without aggressive schemes.

Example

An owner holds European real estate through a Cypriot company. After the threshold is reduced to 20%, we create an additional tier of ownership — this makes it possible to avoid unexpected tax on a sale.

Preparing for audits and the new rules

We assist with:

1. establishing genuine business substance;

2. preparing documentation for intra-group transactions;

3. liaising with the tax authorities.

This is especially important for companies operating simultaneously in the EU, the UAE and Asia.

Working with business owners and family offices

We advise not only companies but also the owners themselves on:

1. planning dividend payments;

2. asset protection;

3. long-term ownership structuring.

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Free webinar on Cyprus tax reform 2026

Receive practical recommendations on adapting international structures to Cyprus’s new tax rules.

On 26 February, REVERA’s experts will discuss the practical implications of the tax reform:

• 15% corporate tax
• tax on dividends abroad
• substance requirements
• holding restructurings
• tax risks on the sale of assets

Program and Registration