On 1 January 2026 Cyprus raised its corporate income tax from 12.5% to 15%. The Ministry of Finance links the new rate to the OECD minimum tax initiatives. For a small island economy that built part of its appeal on a low rate, this is a policy shift worth reading closely.
From 12.5% to 15% in one step
The rate applies to every Cyprus tax-resident company and every permanent establishment. A company formed in 2026 starts at 15%, and the Ministry of Finance ties the figure to the OECD minimum tax initiatives rather than to a purely domestic budget choice.
The change is also a signal. A state that once competed on the headline rate now aligns with a shared international floor. Companies that used Cyprus for its rate alone lose an argument. Companies that use it for other reasons, such as EU membership, may see little change in why they chose it.
Dividends: 5% instead of 17%
The reform cuts the tax on dividends in a way that offsets part of the higher corporate rate. An owner who is tax resident and domiciled in Cyprus pays 5% Special Defence Contribution (SDC) on dividends from profits earned since 1 January 2026. The earlier rate was 17%.
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SDC is a tax of its own, separate from income tax. An owner who lives abroad, or holds non-dom status in Cyprus, stands outside this 5% charge.
The effect is a different balance between the two layers of tax. The company pays more on its profit. A resident owner pays much less when that profit is distributed.
Stamp duty repealed, losses carried for longer
The Stamp Duty Law was repealed. A contract, an agreement or another document signed on or after 1 January 2026 carries no stamp duty. For a company that signs many agreements, the change removes a cost from every contract.
Three more rules changed on the same day:
- tax losses can be carried forward for 7 years, up from 5;
- SDC on rental income is abolished;
- deemed dividend distribution is abolished for profits of 2026 onwards.
The longer loss window matters most for young companies. A start-up that loses money for several years keeps the right to set those losses against later profit for two more years than before.
What it means for a company registered in Cyprus
A new Cyprus company now works with a simple set of numbers: 15% on profit, 5% on dividends to a resident and domiciled owner, no stamp duty and a seven-year loss window. A private company needs one director and one secretary, and the Companies Law names no minimum share capital. Timelines, state fees and the steps of registration are set out in Legarithm’s Cyprus guide, which is useful to anyone comparing the jurisdiction with others.
The Registrar of Companies charges €165 for incorporation, or €265 with the accelerated procedure. Within 60 days of incorporation the company applies for its tax number, online, through the Tax For All portal of the Tax Department.
Why the pairing of rates matters
Taken alone, 15% looks like a loss of advantage. Taken together with 5% on dividends, no stamp duty and a longer loss window, it looks like a redesign. The state collects more at company level and gives back at owner level. Whether that suits a given owner depends on residence and domicile, because the 5% applies only to owners who are both tax resident and domiciled in Cyprus.
What remains open
The reform answers one question, which is the rate. It does not answer where a group’s real activity sits, who pays for the people and offices behind a company, or how banks judge substance. Those questions stay with the company and its advisers.
Readers who plan a structure should confirm their own tax position with a qualified adviser. The rules above describe the law as it stands from 1 January 2026, and individual cases turn on residence, domicile and the source of the profit.
