Cyprus Corporate Income Tax Deductible Expenses 2026 — Practical Checklist (Article 9 ITL)

1. Standard deductible categories (Article 9 + circulars)

• Salaries + wages + employer social-insurance contributions + employer GeSY.
• Rent paid on business premises.
• Utility costs (electricity, water, internet, phone) for business premises.
• Office supplies + consumables.
• Professional fees: legal, accounting, tax advisory, audit, consulting.
• Insurance premiums (business-asset, professional indemnity, D&O, employer's liability).
• Travel expenses (business-purpose, with receipts + business-purpose documentation).
• Subscriptions + memberships (professional bodies, industry associations).
• Bad debts written off (provided proven non-recoverable).
• Marketing + advertising expenses.
• Bank charges + transaction fees.
• Depreciation of plant + machinery + equipment + vehicles (per Cyprus depreciation schedule).

2. Special / enhanced deductions

• 20% R&D super-deduction (2026 reform — Law 240(I)/2025) — extra 20% deduction on qualifying R&D expenditure.
• Notional Interest Deduction (NID) — deduction for new equity invested in business (Article 9B ITL).
• IP Box 80% exemption on qualifying intangible-asset profits (Article 9(1)(l) ITL).
• Capital allowances — accelerated for specific asset categories (energy-saving plant, IT, automation).
• Donations to approved charities — deductible up to 25% of net profit.

3. Non-deductible expenses

• Entertainment expenses (clients / business associates) — explicit non-deductible.
• Private (non-business) portion of mixed-use expenses.
• Dividend payments to shareholders (corporate distributions, not expenses).
• Fines + penalties (criminal + administrative).
• Improvements to leased premises — capitalised, not expensed.
• Interest on excess thin-capitalisation borrowing (Article 11A cap).
• Tax payments themselves (Cyprus CIT, foreign tax) — not deductible.
• Capital expenditure (capitalised + depreciated over useful life — not expensed).

4. Specific industry adaptations

• Shipping companies under tonnage tax — irrelevant; tonnage tax replaces normal CIT.
• Financial undertakings (banks, insurance, regulated investment firms) — specific carve-outs in IFR / IFD reporting + EBITDA computation.
• Real-estate investment funds (REIFs) — specific compartmentalised treatment.
• Crypto-asset service providers (CASPs) — standard 15% CIT on profits; specific cost-of-goods-sold characterisation for trading inventories.

5. Documentation requirements

1. 1Original invoices / receipts for all claimed expenses — retain 6 years (Cyprus tax-record retention).
2. 2Business-purpose documentation (board minutes, decision-makers' approvals, project context).
3. 3Mixed-use expenses (vehicle, home-office) — apportionment methodology documented.
4. 4Foreign-currency expenses — recorded in EUR at exchange rate on transaction date.
5. 5Travel expense receipts + business-purpose narrative.
6. 6R&D expenditure — separate ledger per qualifying project.
7. 7IP Box-attributable expenses — separate ledger for nexus calculation.

6. Worked example — €1M revenue Cyprus Ltd

Cyprus SaaS Ltd, €1M revenue, illustrative deduction profile:

• Salaries (incl. employer SI + GeSY): €400,000 — fully deductible.
• Office rent + utilities: €60,000 — fully deductible.
• Professional fees (audit, tax advisory, legal): €25,000 — fully deductible.
• Marketing + ad spend: €80,000 — fully deductible.
• Travel + subsistence: €40,000 — fully deductible (with documentation).
• Bank + payment-processing fees: €15,000 — fully deductible.
• Entertainment (client dinners): €8,000 — NOT deductible.
• Depreciation of IT + office equipment: €12,000 — fully deductible.
• Total deductions: ~€632,000. Taxable profit: ~€368,000. CIT at 15%: ~€55,200.

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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.