Cyprus Corporate Tax - Guide for International Expansion

Are you considering expanding your business to Cyprus? Understanding the corporate tax landscape is essential for making informed decisions about establishing operations in this Mediterranean island nation.

Cyprus offers an attractive business environment with its strategic location between Europe, Asia, and Africa, combined with EU membership benefits and a competitive tax framework. Whether you're planning to set up a subsidiary, establish a regional headquarters, or simply understand your tax obligations, getting to grips with Cyprus's corporate tax system is crucial for your business success.

If you're looking for efficient ways to manage international payments and handle cross-border transactions, Wise Business can help streamline your financial operations while you navigate Cyprus's business landscape.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Cyprus Corporate tax rate in 2025

Cyprus maintains a competitive corporate income tax rate of 12.5% for 2025, which has remained unchanged for several years. This rate applies to all companies that are tax residents of Cyprus, making it one of the more attractive corporate tax rates within the European Union.¹

However, it's important to note that Cyprus has implemented the Qualified Domestic Minimum Top-up Tax (QDMTT) as part of the global Pillar Two framework. For large multinational companies with annual revenues of €750 million or more, the effective corporate tax rate is now 15% due to this minimum tax requirement.²

The standard 12.5% rate applies to most business profits, including trading income, investment income, and capital gains (with certain exemptions). Cyprus also offers various tax incentives and exemptions, particularly for intellectual property income through its IP Box regime, which can reduce the effective tax rate on qualifying IP income to as low as 2.5%.³

Read more about the corporate tax in United States

How to pay corporate tax in Cyprus

Corporate tax in Cyprus is administered by the Tax Department of the Ministry of Finance. Companies must register for corporate tax purposes and file annual tax returns along with making the necessary payments in euros.³

Registration and Filing Requirements

All Cyprus tax resident companies must register with the Tax Department within 60 days of commencing business activities. Companies are required to file their corporate tax return (Form T.D.1) by 31 March of the year following the tax year, provided the company's accounting period ends on 31 December. For companies with different year-ends, the return must be filed within 12 months of the accounting period end.⁴

Payment Methods and Currency

The Tax Department accepts payments through:⁵

• Bank transfer to designated government accounts

• Online payments through the Tax Department's electronic services platform

Payment Timeline and Provisional Tax

Cyprus operates a provisional tax system where companies must pay provisional tax by 31 July of the current tax year, based on the estimated taxable income for that year. The provisional tax payment should be at least 75% of the previous year's tax liability or the estimated current year liability, whichever is higher.⁶

Any balance of tax due must be paid by 1 August of the following year. If the provisional tax paid exceeds the final liability, the excess is refunded or can be offset against future tax obligations.³

Penalties and Interest

In Cyprus, the penalty system for corporate tax is multi-faceted. Late payment of corporate tax is subject to an interest rate of 5.5% per annum for 2025, a rate set annually by the Minister of Finance. There may also be an administrative penalty of 1% to 5% on the overdue amount. Failure to file a return on time incurs a fixed administrative penalty of €100, with an additional penalty of up to €1,700 possible if the delay exceeds three months. A particularly important penalty to note is the 10% additional tax levied on the difference between the final tax due and the provisional tax paid if a company's provisional taxable income is underestimated by more than 25%.⁷

Tax Calculation Example

Let's consider a Cyprus company with an annual turnover of €1.5 million and a profit margin of 15%, resulting in taxable profits of €225,000.

At Cyprus's standard corporate tax rate of 12.5%, the annual tax liability would be:

€225,000 × 12.5% = €28,125

The company would need to pay provisional tax of €28,125 by 31 July, with any adjustments made when filing the final return by 31 March of the following year.

When expanding your business to Cyprus, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to expand internationally with local EUR account details. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Cyprus

A few tips to keep your company fully compliant with the Cypriot tax regulations:⁸

• Register for taxes early: Within 60 days of incorporation, companies must register with the Tax Department and obtain a tax number. VAT registration is required if taxable supplies exceed €15,600 in 12 months. Employers must also register with the Social Insurance Services for each district or economic activity. Using corporate tax compliance software can make this process more efficient and accurate.
• File annual returns: Every company must submit an annual return and financial statements to the Registrar of Companies. In addition, audited financial statements and a tax return must be filed with the Tax Department each year. Corporate tax planning becomes crucial at this stage to ensure smooth filing and to avoid penalties.
• Pay the annual levy: All companies must pay a € 350 yearly fee by 30 June each year. Missing this deadline can result in penalties and potential legal complications.
• Conduct financial audits: Annual audits by qualified professionals are a legal requirement. They ensure compliance with Cypriot accounting standards and strengthen a company’s credibility. Businesses often rely on corporate tax software to streamline audit preparation and reporting.

Timely registration, accurate filings, and corporate tax compliance software help businesses maintain legal compliance and strengthen credibility in Cyprus’s competitive market.

International Expansion to Cyprus

For companies eyeing global expansion, Cyprus is a solid option. As a member of the European Union, it benefits from fiscal coordination across 27 member states,⁹ access to the EU’s Single Market of more than 500 million consumers, and the stability of the euro currency. This combination creates a favorable and predictable environment for investors.

The Cypriot economy has undergone a substantial transformation in recent years. GDP growth is 3.4%, unemployment is 4.9%, and the banking sector has regained stability, positioning Cyprus among the EU’s most resilient economies.¹⁰ Tourism remains a significant growth driver, generating nearly €2.5 billion in 2022 and boosting industries such as transport, retail, and construction.¹¹ Energy, shipping, investment funds, and real estate also attract multinational companies seeking long-term growth.

One of the strongest incentives for investors is the Cyprus corporate tax rate, set at just 12.5%. This is among the lowest in the EU, supported by more than 60 double taxation treaties and exemptions, such as no capital gains tax on securities.¹²

Here’s what you need to do when planning to establish your business in Cyprus:¹³

1. Conduct market research and prepare a business plan.
2. Choose a legal structure and secure a business location.
3. Register your company name with the Registrar of Companies.
4. Apply for taxpayer registration within 60 days to obtain a tax number.
5. Open a business bank account and establish a bookkeeping system.

Living in Cyprus will be an experience in itself. To establish your business on firm ground, it would be better to outsource complex tax tasks to a corporate tax law firm.

Read more about the corporate tax in Nevada

Incorporation of Business in Cyprus

To incorporate a business in Cyprus, companies must register with the Registrar of Companies through the Department of the Registrar of Companies and Intellectual Property. The process begins with securing a unique company name through the online database.

After approval, the business must prepare its Memorandum and Articles of Association, which set the company’s objectives and internal governance rules.

In addition, the following details are required for incorporation:¹³

• Company name: approved and reserved with the Registrar.
• Type of company: entity form chosen based on business needs.
• Registered office: a physical address located in Cyprus.
• Directors and secretary: at least one director and a secretary are required.
• Shareholders: the owners of the company, who may be individuals or corporate entities.
• Share capital: issued according to the needs of the business.
• Taxpayer registration: Companies must apply within 60 days to obtain a tax number and complete registration for corporate tax.

Many companies engage a corporate tax attorney or a corporate tax law firm to handle filings, advise on the corporate dividend tax rate, and oversee cross-border obligations to ensure compliance. Proper structuring has become increasingly important as the global minimum corporate tax framework reshapes international taxation.

Business Entities in Cyprus

According to the Cyprus Companies Law, the main types of business entities available:¹⁴

• Private Company Limited by Shares (Ltd): The most common entity, offering limited liability to shareholders and suitable for small and medium-sized businesses.
• Public Company Limited by Shares (PLC): Designed for businesses looking to raise capital publicly. Requires a minimum of seven shareholders.
• Partnerships (General or Limited): Flexible structures often used for smaller businesses or joint ventures.
• Sole Proprietorship: A simple setup where one individual owns and manages the business, bearing full liability.
• Company Limited by Guarantee (CLG): Primarily used for non-profit organizations and associations.

International corporate tax best practices

Managing corporate tax obligations across multiple jurisdictions requires a strategic approach that balances compliance with tax efficiency. Here are key practices that international businesses should consider when operating in Cyprus and other countries.

Maintain Robust Documentation and Compliance Systems

Establish comprehensive record-keeping systems that track all business activities, transfer pricing documentation, and substance requirements. Cyprus, like other EU member states, has strict documentation requirements, particularly for companies claiming benefits under double taxation treaties. Ensure all transactions are properly documented with commercial rationale and arm's length pricing.

Leverage Double Taxation Treaties

Cyprus has an extensive network of double taxation treaties with over 65 countries, making it an attractive jurisdiction for international businesses. These treaties can significantly reduce withholding taxes on dividends, royalties, and interest payments. Understanding and properly utilising these treaties can result in substantial tax savings while ensuring compliance with anti-treaty shopping rules.

Understand Substance Requirements

With the implementation of EU Anti-Tax Avoidance Directives and OECD BEPS measures, demonstrating economic substance has become crucial. Companies must show genuine business activities, adequate staff, and decision-making processes in Cyprus to benefit from the tax regime. This includes maintaining proper board meetings, having qualified personnel, and conducting real business operations.

Plan for Global Minimum Tax Compliance

The OECD Pillar Two global minimum tax framework affects large multinational groups with revenues exceeding €750 million. Companies should assess their effective tax rates across all jurisdictions and implement top-up taxes where necessary to meet the 15% minimum threshold.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Cyprus efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Cyprus

Who is liable for corporate tax in Cyprus?

All companies that are tax residents of Cyprus are liable for corporate tax on their worldwide income. A company is considered a Cyprus tax resident if it is incorporated in Cyprus or if its management and control are exercised in Cyprus. Non-resident companies are only taxed on income derived from sources within Cyprus, such as income from a permanent establishment or certain types of Cyprus-source income subject to withholding tax.

Are there any tax incentives for businesses in Cyprus?

Yes, Cyprus offers several attractive tax incentives. The IP Box regime allows qualifying intellectual property income to be taxed at an effective rate of 2.5%. There's also a notional interest deduction that allows companies to claim a tax deduction on deemed interest on qualifying equity, effectively reducing the corporate tax rate. Additionally, Cyprus offers a participation exemption for dividends received from qualifying subsidiaries and capital gains exemptions on the disposal of shares and immovable property outside Cyprus.

What is the tax treatment of dividends in Cyprus?

Dividends received by Cyprus companies from qualifying participations (generally requiring at least 1% shareholding) are exempt from corporate tax under the participation exemption. Dividends paid by Cyprus companies to non-resident shareholders are generally subject to withholding tax, but this can be reduced or eliminated under double taxation treaties. Dividends paid to EU resident companies may qualify for exemption under the EU Parent-Subsidiary Directive.

What is the process for registering for corporate tax in Cyprus?

Companies must register with the Tax Department within 60 days of commencing business activities in Cyprus. The registration process involves submitting Form T.D.4 along with supporting documents including the certificate of incorporation, memorandum and articles of association, and details of directors and shareholders. Once registered, companies receive a tax identification number and must comply with ongoing filing and payment obligations.

What are the common pitfalls to avoid regarding corporate tax in Cyprus?

Common pitfalls include failing to demonstrate adequate economic substance, which can result in challenges from tax authorities and loss of treaty benefits. Another frequent issue is inadequate transfer pricing documentation, particularly for related party transactions. Companies should also be careful about the timing of provisional tax payments to avoid interest charges, and ensure proper classification of income to benefit from available exemptions. Finally, failing to comply with EU state aid rules when claiming certain tax benefits can result in recovery of tax advantages.

Sources used in this article:

1. Tax Foundation: Corporate Tax Rates by Country 2024
2. PHS Tax: Cyprus 2025 Tax Reforms
3. PwC Cyprus: Tax Facts and Figures 2025 (PDF)
4. RSM Cyprus: Cyprus Tax Facts 2025 (PDF)
5. Cyprus Government: Payments for Direct Taxation
6. QNTA: Cyprus Provisional Tax Guide
7. Rightax: Cyprus Tax Penalties & Interest Guide
8. Start Company Formations: How to Establish a Company in Cyprus
9. EU Commission: EU Economic Policy and Cyprus
10. ESM: Cyprus Economy - Current Landscape
11. Cyprus Profile: Tourism Sector
12. Cyprus Government: Why Invest in Cyprus
13. Cyprus Registrar of Companies: After Incorporation
14. A. Georgiou & Co. LLC: Cyprus Companies Law

Sources last checked 12/09/2025