Why Cyprus

Modelled on English common law and fully aligned with EU and OECD standards, Cyprus offers international investors a familiar, predictable legal system inside one of the most competitive business environments in the European Union. Since joining the EU in 2004 and the eurozone in 2008, Cyprus has developed into an established hub for international holding, financing, shipping, technology and investment structures.

A Common Law Jurisdiction inside the European Union

The Cypriot legal system is based on English common law. Its company, contract and trust law will be immediately recognisable to international counterparties, lenders and their advisers, and English case law remains persuasive authority before the Cypriot courts. Cyprus is also a party to the New York Convention, making arbitral awards readily enforceable.

EU membership means that Cypriot companies benefit from the full framework of EU law, including the Parent-Subsidiary, Interest and Royalties and Merger Directives, passporting for regulated financial services, and access to the single market. Cyprus has also implemented a modern foreign direct investment screening framework under Law 194(I)/2025, aligned with Regulation (EU) 2019/452, providing a transparent and predictable review process for investments in sensitive sectors.

Tax Advantages after the 2026 Reform

In December 2025, Cyprus enacted its most significant tax reform in over a decade, in force from 1 January 2026. The reform aligns Cyprus with the OECD global minimum tax framework while preserving, and in several respects enhancing, the incentives that have made Cyprus a leading jurisdiction for international business:

  • Competitive headline rate: a 15% corporate income tax rate, among the lowest in the European Union and aligned with the OECD Pillar Two global minimum tax.
  • No tax on dividends paid to non-residents: dividends paid by a Cyprus company to non-resident shareholders, whether companies or individuals, are entirely free of Cyprus withholding tax and of any other Cyprus taxation in the hands of the recipient. The only exception is a targeted defensive withholding on dividends paid to related companies in EU-listed and low-tax jurisdictions.
  • No withholding tax on interest and royalties: interest and royalty payments to non-residents are likewise free of Cyprus withholding tax, subject to the same targeted defensive measures.
  • Participation exemption: dividends received by Cyprus companies are, as a rule, exempt from taxation, subject to conditions.
  • Reduced dividend taxation for residents: the Special Defence Contribution on dividends paid to Cyprus tax resident and domiciled individuals is reduced from 17% to 5% for dividends paid out of profits earned from 1 January 2026, while the deemed dividend distribution rules are abolished for such profits.
  • No tax on disposal of securities: gains on the disposal of shares and other qualifying securities are exempt from taxation. Capital gains tax is confined to gains connected with immovable property situated in Cyprus.
  • IP box regime: qualifying profits from intellectual property benefit from an 80% deduction, producing an effective tax rate as low as 3%.
  • Tax-neutral reorganisations: mergers, divisions and other corporate reorganisations may be implemented on a tax-neutral basis, subject to conditions.
  • Further improvements: stamp duty is abolished for documents executed from 1 January 2026, and tax losses may now be carried forward for seven years, extended from five.
  • Extensive treaty network: double taxation treaties with more than 60 countries, complemented by the EU directives, and an EU-approved tonnage tax system for shipping.
For Individuals and Relocating Teams
  • Non-domicile regime: expressly preserved by the 2026 reform. Individuals who become Cyprus tax residents without being domiciled in Cyprus pay no Special Defence Contribution on dividends and interest for up to 17 years.
  • Relocation incentives: a 50% income tax exemption is available for individuals taking up first employment in Cyprus with annual remuneration above EUR 55,000, subject to conditions.
  • Revised personal tax bands: personal income tax bands were revised upwards under the 2026 reform, increasing the tax-free threshold.
  • Private wealth: Cyprus imposes no inheritance tax, and foreign pension income benefits from favourable optional tax treatment.

Beyond tax, Cyprus sits at the crossroads of Europe, the Middle East and Africa. The economy is services-driven, supported by a deep pool of qualified lawyers, accountants and bankers, with English used routinely in business, while set-up and operating costs remain competitive by EU standards.

Papadopoulos, Lycourgos & Co LLC advises international clients at every stage of investing in or through Cyprus: incorporation and structuring, banking and regulatory matters, foreign direct investment screening, real estate, employment and relocation, and dispute resolution.

Frequently Asked Questions

What is the corporate tax rate in Cyprus?
15%, effective for tax years beginning on or after 1 January 2026, aligned with the OECD Pillar Two global minimum tax and among the lowest rates in the European Union.

Does Cyprus tax dividends paid to non-residents?
No. Dividends paid by a Cyprus company to non-resident shareholders carry no Cyprus withholding tax, with the sole exception of targeted defensive measures on payments to related companies in EU-listed and low-tax jurisdictions.

What is the Cyprus non-domicile regime?
Individuals who become Cyprus tax residents without being domiciled in Cyprus pay no Special Defence Contribution on dividend and interest income for up to 17 years. The regime was expressly preserved by the 2026 tax reform.

Is Cyprus a common law jurisdiction?
Yes. The Cypriot legal system is based on English common law, English case law remains persuasive authority, and Cyprus has been an EU member since 2004 and a eurozone member since 2008.

Does Cyprus screen foreign investments?
Yes. Cyprus operates a foreign direct investment screening framework under Law 194(I)/2025, aligned with Regulation (EU) 2019/452, applying to investments in defined sensitive sectors.

This page provides general information only and does not constitute legal or tax advice. Specific advice should be sought before any transaction or investment decision.