By Nexora Cyprus editorial team · General information — seek advice for your circumstances
Two procedural routes
(1) Court-approved capital reduction (traditional Section 64 route — formal but flexible). (2) Solvency-statement capital reduction (post-2015 reform — faster, no court approval, requires directors' solvency declaration). Both result in cancellation of share capital + (optionally) return of capital to shareholders. Post-2026 stamp duty: €0.
1. Legal framework
Cyprus Companies Law Cap. 113 Sections 64-71 govern capital reductions. The 2015 reform introduced the solvency-statement procedure as an alternative to court approval for private companies; public companies still use court-approval route.
2. Court-approved capital reduction
1M&AA authority — Articles must permit capital reduction (modern Cyprus M&AAs do).
2Member special resolution (75%+ majority).
3Application to Cyprus District Court for confirmation of the reduction.
4Court hearing — creditors notified, opportunity to object.
5Court order confirming reduction.
6HE filing with Registrar reflecting reduced capital.
7Distribution of capital to shareholders (if applicable).
3. Solvency-statement capital reduction (private companies only)
1M&AA authority + member special resolution.
2Directors' solvency statement — declares company can pay debts as they fall due in the 12 months following.
3Auditor's opinion supporting solvency statement.
4Public notice (Cyprus Government Gazette).
55-week creditor objection period.
6HE filing with Registrar after 5-week period if no creditor objection.
7Distribution of capital + capital reduction completed.
4. Tax treatment — capital reduction with distribution
When capital is reduced and returned to shareholders, the shareholder receives the distribution typically as a CAPITAL transaction (not dividend). Tax treatment:
Shareholder side — capital return on share capital is generally NOT income for Cyprus tax purposes. Article 8(22) titles exemption applies in many capital-reduction-with-share-cancellation scenarios — 0% Cyprus tax for the shareholder.
Company side — Cyprus CIT not affected (the company's profit base does not change from a capital reduction).
Foreign-shareholder side — case-specific based on home jurisdiction's classification of the return.
5. Common use cases
Over-capitalised company returning excess equity to shareholders.
Restructuring before M&A — adjusting capital base to facilitate transaction.
Capital optimization — converting share-premium to distributable form.
Loss-elimination — reducing share capital to write off accumulated losses.
Family-office structuring — capital return to specific shareholder classes pre-succession event.
6. Post-2026 stamp-duty relief
Stamp duty was abolished by Law 239(I)/2025 effective 1 January 2026. Pre-2026, capital-reduction documents attracted small stamp duties. Post-2026 — €0 stamp duty applies. Net administrative friction reduced.
Official verification starting points
Cyprus Tax Department documents and Cyprus Tax Reform 2026 material publish the controlling material for this topic. Check the current law, form, circular or portal instructions before acting; this article is general information and the live official material prevails.
Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Tax laws change frequently. Consult a qualified Cyprus adviser for guidance specific to your situation. The information on this page is general guidance only and does not constitute legal, tax, accounting, immigration or financial advice. Specific advice should be obtained based on the facts of each case.
Read each reference alongside the claim it accompanies and check current amendments before relying on it. General information — seek advice for your circumstances.