Cyprus Corporate Tax Rate [2026 Guide]

Cyprus corporate tax rate is 15% as of January 2026. Cyprus raised its corporate tax in January 2026, aligned with the OECD Pillar Two global minimum tax. This post covers what changed, which companies are affected, and why Cyprus remains the most competitive EU jurisdiction for entrepreneurs despite the increase.

The Previous Rate: Two Decades of EU Competitiveness

Cyprus set its corporate tax rate at the same level as Ireland when it joined the EU in 2003. For over two decades, that rate was among the lowest in the EU - well below the 25-30% rates in France, Germany, and the Netherlands. This attracted substantial foreign direct investment, particularly in shipping, professional services, and technology holding structures.

During this period, a Cyprus company benefited from the IP Box regime (reducing the effective rate to approximately 3% on qualifying intellectual property income), the Notional Interest Deduction (NID), and the Non-Dom dividend extraction model. Cyprus became the default EU jurisdiction for international entrepreneurs seeking a legitimate, OECD-compliant low-tax base.

Why Cyprus Raised Its Corporate Tax Rate to 15%

The change is a direct consequence of the OECD Pillar Two agreement and the EU Minimum Tax Directive (Council Directive 2022/2523/EU). Pillar Two establishes a global minimum effective corporate tax rate of 15% for multinational groups with annual revenue above EUR 750 million.

For Cyprus, the EU directive required transposition into national law by December 31, 2023, with application from January 1, 2024 for in-scope multinationals. The Cypriot parliament went further in the December 2025 reform package: it aligned the standard corporate tax rate with the 15% minimum floor for all companies, simplifying compliance and positioning Cyprus as fully aligned with the emerging EU minimum tax architecture.

Maintaining a lower statutory rate while applying Pillar Two top-up taxes to large multinationals would have created significant administrative complexity. The 15% statutory rate simplifies this for all companies and makes Cyprus's position more transparent to international investors.

Which Companies Are Affected by the Rate Change?

All Cyprus-resident companies are subject to the 15% rate from January 1, 2026. There is no grandfathering for companies formed under the previous rate. The new rate applies to net taxable profits after allowable deductions.

Impact by company type:

• Small and micro businesses (below EUR 750M group revenue): subject to 15% on net profits. These companies are not in scope for Pillar Two top-up taxes. The rate increase affects them directly at the company level.
• Large multinational groups (above EUR 750M revenue): already subject to Pillar Two minimum top-up mechanisms. The 15% statutory rate now simplifies their effective rate calculations.
• IP Box companies: the effective rate on qualifying IP income increases slightly because the underlying statutory rate is higher. The 80% exemption on qualifying IP income still applies, giving an effective rate of approximately 3%.

Why Cyprus Is Still the Most Competitive Option in the EU

The 15% statutory rate is only part of the story. What makes Cyprus uniquely competitive is the combination of that rate with the Non-Dom dividend extraction model. Here is how it works in practice for an entrepreneur extracting profits as dividends:

• Company pays 15% corporate tax on net profits.
• Remaining 85% is distributed as dividends.
• Non-Dom shareholder pays 0% income tax on dividends (SDC exempt).
• Non-Dom shareholder pays 2.65% GHS on dividends, capped at EUR 180,000 annual base (maximum EUR 4,770/year).
• Total effective rate: approximately 5% when the GHS cap is factored across typical income levels between EUR 50k and EUR 300k.

Compare this with other EU jurisdictions at EUR 100,000 income: Germany 47%, France 48%, Netherlands 41%, UK 25% corp + 39% dividend tax (non-dom abolished April 2025). Use the tax calculator to see your exact figures.

Notional Interest Deduction (NID) Still Reduces Effective Rate

The Notional Interest Deduction (NID) remains fully operational. For 2026, the NID rate is 8.049% (Cyprus 10-year government bond yield + 5%). Companies can deduct this percentage of new equity injected into the company from taxable profits, reducing the effective corporate tax rate to as low as 3% for well-capitalised companies.

A company with EUR 100,000 of new equity injection gets a NID deduction of EUR 8,049. At 15% corporate tax, this saves EUR 1,207 in tax annually. For tech companies or holding structures with significant equity, NID meaningfully reduces the corporate tax burden.

The Cyprus IP Box regime also remains fully operational. Companies with qualifying intellectual property (patents, software meeting OECD NEXUS criteria) can apply an 80% deduction on net IP income, giving an effective rate of approximately 3% on that income.

How Cyprus 15% Compares to Other EU Countries

The 15% rate is still among the lowest corporate tax rates in the EU. Current landscape:

• Cyprus: 15% statutory, effective ~5% with Non-Dom dividend extraction
• Ireland: 15% for multinationals (aligned with Pillar Two); 15% for qualifying trading income of smaller companies - but no personal Non-Dom equivalent, so owner-managers pay up to 51% on salary
• Bulgaria: 10% flat corporate tax, but dividend extraction brings effective total closer to 13-14%; no Non-Dom regime
• Hungary: 9% flat, but significant additional levies and complex rules for distributions
• Malta: 35% statutory, 6/7 refund system gives effective ~5% post-refund - but refund takes months, significant cash flow cost vs Cyprus where 15% is paid upfront

Cyprus is the only EU country that combines a competitive corporate rate with the most effective personal tax regime for dividend income. See the full European tax regimes comparison for a side-by-side breakdown.

Frequently Asked Questions

What is the Cyprus corporate tax rate in 2026?

15%, effective January 1, 2026. According to PwC Cyprus Tax Facts 2026, the rate aligns with the OECD Pillar Two global minimum and applies to all Cyprus-resident companies.

When did Cyprus change its corporate tax rate?

The change took effect January 1, 2026, as part of the December 2025 tax reform package. The same package also updated personal income tax bands (threshold increased to EUR 22,000).

Does the rate change affect existing Cyprus companies?

Yes. The 15% rate applies from January 1, 2026 to all Cyprus-resident companies regardless of formation date. There is no grandfathering or transition period.

Is the effective tax rate in Cyprus still competitive at 15%?

Yes. With the Non-Dom dividend extraction model, the total effective rate for an entrepreneur is approximately 5-17% depending on income level. The company pays 15% corporate tax; the Non-Dom shareholder pays only 2.65% GHS on dividends (0% income tax).

Does the Cyprus IP Box regime still apply after the rate increase?

Yes. The IP Box 80% deduction on qualifying IP income still applies. The effective rate on IP income is now approximately 3% (15% statutory x 20% taxable base).

Is Cyprus still better than Bulgaria for company formation?

For most international entrepreneurs, yes. Bulgaria has a lower corporate rate but no Non-Dom equivalent. Its effective extraction rate is approximately 14%. Cyprus at 15% corp + 2.65% GHS on dividends gives approximately 17% at company level - but with substantially better legal infrastructure, EU banking (SEPA), English as business language, and 65+ tax treaties.

Will Cyprus raise its corporate tax rate again?

No current plans. The 15% rate is explicitly aligned with the OECD Pillar Two floor. Per Cyprus Ministry of Finance announcements, no further rate increase is planned. Any future change would require either a new OECD agreement or a domestic political decision.

Need personalized advice? Book a consultation with an expat tax specialist.

Sources: PwC Cyprus Tax Facts 2026, Cyprus Tax Department.