The 2026 Cyprus tax reform changes how companies are taxed, how profits are distributed, and how firmly the tax authorities can enforce the rules. With appropriate planning, Cyprus can remain an attractive headquartering and holding jurisdiction for many corporate structures, especially those with a cross‑border focus.

1. Corporate tax at 15%

From 2026, the corporate income tax rate rises from 12.5% to 15% for Cyprus tax‑resident companies and for permanent establishments of foreign companies in Cyprus. This aligns Cyprus with the 15% global minimum tax trend and can reduce exposure to additional “top‑up” tax in other jurisdictions, particularly for groups within the OECD relevant framework (Pillar Two).

For groups, this means:

• Structures with Cyprus‑incorporated but foreign‑managed entities should be reviewed for residence and treaty‑residence issues.
• The 15% rate should be built into global tax planning and intragroup pricing and calculations.

2. Losses Come Forward

• Very important is the change as regards losses carried forward
• Tax losses can be carried forward for 7 years instead of 5, which may help offset the higher rate for loss‑making or capital‑intensive businesses.

3. Cyprus as a platform for international structures

Although the reform mainly impacts local Cypriot entities, Cyprus continues to offer features that are relevant to foreign‑interest groups, holding platforms and IP‑rich businesses. Key points include:

• IP regime: Cyprus maintains its popular IP Box Regime that can significantly reduce the effective tax rate on qualifying intellectual property income, subject to conditions and nexus requirements.
• Non‑dom framework: Individuals who are tax‑residents but non‑domiciled can benefit from favourable treatment on certain categories of investment income, including dividends and interest, for a defined period.
• Notional Interest Deduction (NID): NID on new equity can reduce a company’s effective tax rate by allowing a notional interest expense, within statutory limits.
• Stamp duty abolition: The abolition of stamp duty from 1 January 2026 reduces transactional frictions. It also simplifies the establishment of structures involving Cypriot trusts that previously incurred fixed stamp duty and registration fees.

These elements, combined with more traditional advantages such as extensive double tax treaty coverage, can support cross‑border planning where substance and commercial drivers are present.

4. Legal, Regulatory and Practical Environment

For foreign counsel and tax advisers, Cyprus continues to offer a familiar framework:

• A common‑law based legal system and a well‑developed courts and arbitration environment.
• Alignment with EU and OECD standards on transparency, AML/CFT and economic substance.
• Access to experienced, multilingual professionals across legal, tax, accounting and fiduciary services.
• Competitive operating and setup costs compared with many other EU jurisdictions.

The 2026 reform strengthens the enforcement tools of the Tax Department (for example, longer assessment periods, clearer record‑keeping rules, and powers to suspend business operations or secure tax debts), which makes consistent compliance and documentation more important in practice.

4. Working Together

Overall, the reforms keep Cyprus competitive as a business and holding location, particularly for international groups that are already planning around a 15% minimum effective tax rate. Structures that are well‑documented, commercially driven and compliant with the new rules are better placed to benefit from the jurisdiction’s remaining incentives.

If you are advising clients on cross‑border structures that involve, or may involve, Cyprus, we would be pleased to discuss local implementation, ongoing compliance and co‑operation on joint client mandates.

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This article is provided for general information purposes only and does not constitute legal, tax, or other professional advice. It should not be relied upon as a substitute for specific advice on any individual matter or transaction. Professional advice should be obtained before acting or refraining from acting on the basis of any information contained herein.

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