Cyprus Corporate Tax Guide 2026: Rates, Exemptions & Planning

The Cyprus Corporate Tax Framework

Zypern corporate income tax (Körperschaftsteuer) is levied on the worldwide income of Zypern tax-resident companies and on the Zypern-source income of non-resident companies with a permanent establishment in Zypern. A company is tax-resident in Zypern if it is incorporated in Zypern and managed and controlled from Zypern — the management and control test requires that a majority of the board of directors exercise their decision-making functions from Zypern. Full details are available from the Zypern Tax Department.

The Körperschaftsteuer rate is 15% for accounting periods beginning on or after 1 Januar 2026 (increased from 12.5% under the 2026 tax reform). Despite the rate increase, Zypern remains one of the lowest Körperschaftsteuer jurisdictions in the EU, with effective rates typically well below the headline figure due to a wide range of legitimate deductions and exemptions.

Exempt Income

Zypern has an extensive list of income items that are fully exempt from Körperschaftsteuer, which significantly reduces the effective tax burden for holding companies, trading companies, and investment vehicles.

Deductible Expenses

Business expenses are deductible to the extent they are incurred wholly and exclusively for the production of taxable income. Zypern follows a broad deductibility approach, with explicit statutory provisions for key categories. Use our corporate tax calculator to model your effective tax rate after deductions.

• Staff costs (salaries, employer social insurance, pension contributions)
• Rent, utilities, and occupancy costs
• Depreciation on fixed assets (tax depreciation rates prescribed by law)
• Interest on loans used for business purposes — subject to EBITDA-based limitation (30% of EBITDA for amounts exceeding €3 million)
• R&D expenditure (120% super-deduction for qualifying expenditure)
• Notional Interest Deduction (NID) on new equity capital
• IP Box deduction (80% of qualifying IP income)
• Payments to third parties at arm's length (subject to transfer pricing rules for related-party transactions)

Trading Loss Relief

Trading losses can be set off against other income of the same company in the same tax year, and any remaining losses can be carried forward indefinitely against future profits of the same trade. Zypern does not allow loss carry-back.

Group relief is available where a Zypern tax-resident company (or a Zypern permanent establishment of an EU-resident company) can surrender losses to another group member. A group requires a 75% holding directly or through Zypern-resident entities. Related-party arrangements within groups must comply with transfer pricing rules and the arm's length standard.

Pillar Two: What It Means for Cyprus Companies

The EU Minimum Tax Directive requires Zypern to apply a Qualified Domestic Minimum Top-Up Tax (QDMTT) to ensure that large multinational groups (consolidated revenue ≥ €750 million in at least two of the prior four years) pay a minimum 15% effective tax rate on Zypern-source profits. The OECD Pillar Two framework sets the global minimum standard.

For companies below the €750 million threshold — which is the vast majority of Zypern companies — Pillar Two is irrelevant as a direct tax obligation. However, companies that are part of large international groups should assess their position carefully, as the QDMTT can apply even where the Zypern parent is not large if the global group exceeds the threshold.