Cyprus Corporate Tax Guide 2026

Cyprus offers one of the lowest corporate tax rates in the EU at 12.5%, complemented by an Intellectual Property (IP) Box regime with an effective 2.5% rate and a Notional Interest Deduction (NID) on new equity capital. The shipping sector benefits from a 2.5% tonnage tax system. These features make Cyprus a premier EU holding company and IP holding jurisdiction.

Corporate Income Tax (CIT) in Cyprus is administered by the Tax Department of Cyprus under the Ministry of Finance. Companies are taxed on worldwide income if managed and controlled in Cyprus. Non-resident companies are taxed only on Cyprus-source income. For related guidance, see our Corporate Hub Guide →, VAT Guide →, and Cross-Border Guide →.

Corporate Income Tax Rate — 12.5%

The standard CIT rate in Cyprus is 12.5%, one of the lowest in the European Union. This applies to the taxable profits of all resident companies. Key features:

Worldwide income of resident companies is subject to CIT at 12.5%
Capital gains are generally exempt from CIT (except gains on Cyprus immovable property)
Dividends received from abroad are subject to a 0% effective rate via the participation exemption
Profits from a permanent establishment (PE) abroad are exempt with certain conditions
No withholding tax on dividends, interest, or royalties paid to non-residents (with some exceptions for royalties)

Intellectual Property (IP) Box Regime

Cyprus offers one of the most attractive IP Box regimes in the EU under the modified nexus approach (OECD BEPS Action 5 compliant). The regime provides an 80% exemption on qualifying IP profits, resulting in an effective tax rate of 2.5% (12.5% × 20%). Qualifying assets include patents, software copyrights, and other IP assets as defined. The exemption is claimed on the income from qualifying IP assets, including royalties, licensing fees, and gains from the sale of qualifying IP.

Notional Interest Deduction (NID)

The NID allows companies to deduct a notional interest on new equity capital introduced from 1 January 2015. The deduction is calculated at the reference rate (yield on 10-year government bonds plus a spread, currently approximately 2–4%) on the new equity. This effectively reduces the tax burden on equity-financed investments, making debt-equity decisions more tax-neutral. The NID is available for a period of 10 years from the end of the tax year in which the new equity was introduced.

Shipping — Tonnage Tax

Cyprus has a comprehensive tonnage tax system for shipping companies. Qualifying shipping companies may elect to be taxed on the tonnage of their fleet rather than on actual profits. The effective rate under the tonnage tax is approximately 2.5% of deemed profit. This applies to ship-owning, ship-management, and related shipping activities. Cyprus has one of the largest shipping registries in the EU, and the tonnage tax system is fully EU-approved.

Compliance and Filing

Corporate tax returns must be filed by 31 March following the end of the tax year
Provisional tax payments are due in two instalments: 31 July and 31 December
VAT returns are filed quarterly (monthly for large taxpayers)
Companies must maintain proper accounting records for at least 6 years
Penalties apply for late filing (EUR 100 + EUR 50 per month of delay, up to EUR 500)