Cyprus corporate tax in 2026: the 15% rate and the residence test

The rate

The Cyprus Tax Department's own presentation on the 2026 reform states that from 1 January 2026, companies are subject to corporate tax at a rate of 15%, under the Income Tax (Amending) Law N. 244(I)/2025 (Tax Reform 2026, Income Tax). The law takes effect from 1 January 2026 except for the amendment to article 8(22), which applies from 1 January 2031.

The residence test, which is the bigger change

The same presentation records that the definition of resident of the Republic was amended. A company is a resident of the Republic on the management and control test, which was not amended, and additionally if it was incorporated in the Republic under the Companies Law, unless a double taxation treaty provides otherwise. A company that transfers its registered office or seat to Cyprus is treated as incorporated in Cyprus, and the previous condition that the company must not be a resident of another state was deleted.

In plain terms, a Cyprus company can no longer be outside the Cyprus net simply because it is managed from elsewhere. Treaty relief is now the route, and treaty relief needs facts, not assertions.

What the law says about substance

Verify before relying on this: no Cyprus government source we could read publishes a substance checklist for ordinary companies. There is no published minimum number of local directors, no minimum office size and no minimum headcount. Anyone quoting you a substance package is selling a commercial product, not satisfying a published rule. What does exist in law is the residence test above, the arm's length principle and the general anti-abuse rule in the Income Tax Law, and the Tax Department's transfer pricing documentation requirements. Ask your adviser to justify a substance recommendation by reference to those, or to the counterparty jurisdiction's rules, rather than to a Cyprus checklist that is not published.

The reliefs that survive the rate rise

• Profit from the sale of securities is wholly exempt from income tax.
• Intellectual property income: 80% of the net profit calculated on the nexus approach from qualifying intangible assets is exempt.
• Notional Interest Deduction on new equity introduced from 1 January 2015, capped at 80% of the taxable profit derived from the assets financed by that equity, at the 10-year government bond yield of the country where the funds are employed plus a 5% premium.
• Foreign exchange differences not arising from trading in related derivatives and currencies are wholly exempt.
• Shipping operates under a separate tonnage tax regime with an all-or-nothing group election.

All five are listed by the Ministry of Finance (tax incentives, published 15 January 2026).

Compliance dates

• Audited financial statements prepared through an approved auditor are required of legal entities.
• Company income tax return, form T.D.4, is due 15 months after the end of the tax year, or by the date set by the Commissioner.
• Temporary tax assessment on estimated taxable profit, payable in two equal instalments on 31 July and 31 December of the current tax year.
• Self-assessment, form I.R.158A, with the resulting tax payable by 1 August of the year following the tax year assessed.
• VAT registration is required once taxable transactions over the preceding 12 months, or expected in the next 30 days, exceed €15,600.

These are stated on the government's business portal (businessincyprus.gov.cy).