Question 1

Can a foreigner incorporate a company in Cyprus?

Accepted Answer

Yes — there are no residency or nationality requirements for shareholders or directors of a Cyprus private limited company. Foreign nationals can own 100% of a Cyprus company and may act as sole director. The process can be conducted entirely remotely.

Question 2

How long does it take to incorporate a company in Cyprus?

Accepted Answer

Typically 7–14 working days from submission of completed documentation, subject to company name approval by the Registrar of Companies and standard Registrar processing times. Expedited processing may be available in certain circumstances.

Question 3

What is the minimum share capital for a Cyprus company?

Accepted Answer

There is no statutory minimum share capital requirement for a Cyprus private limited company. In practice, €1,000 is commonly used as the authorised and issued share capital, though the structure can be tailored to your specific requirements.

Question 4

Can the entire process be completed remotely?

Accepted Answer

Yes — the entire incorporation process can be conducted remotely, subject to satisfactory completion of KYC (Know Your Customer) due diligence and proper certification and apostille of the required identity documents. No physical presence in Cyprus is required.

Question 5

What company types are available in Cyprus?

Accepted Answer

A private limited company by shares (Ltd) is the most common structure for commercial operations, holding companies, and IP structures. Other structures available include public limited companies (PLC), general and limited partnerships, and branches of foreign companies. The appropriate structure depends on your commercial objectives.

Question 6

What documents are required to incorporate a company?

Accepted Answer

Typically: certified copies of passports and proof of address for all directors, shareholders, and beneficial owners; source of funds declaration; a completed KYC questionnaire; and details of the proposed business activities. Additional documents may be required depending on the structure and nationalities involved.

Question 7

What is the minimum number of directors?

Accepted Answer

A Cyprus private limited company requires at least one director. A sole director company is entirely permissible. There is no maximum number of directors.

Question 8

Can a non-Cypriot be a director?

Accepted Answer

Yes — directors can be of any nationality and may reside anywhere in the world. There is no requirement for a director to be a Cyprus resident, though having at least one Cyprus-resident director or majority of directors resident in Cyprus is important for establishing Cyprus tax residency.

Question 9

What is a nominee director?

Accepted Answer

A nominee director is a professional who acts as the formal, publicly recorded director on behalf of the beneficial owner. The beneficial owner retains full control of the company via a signed, undated resignation letter and a declaration of trust. This arrangement provides a layer of privacy over the company's public records. It must be properly documented and is subject to full KYC requirements.

Question 10

Is a company secretary required?

Accepted Answer

Yes — Cyprus law requires every company to have an appointed company secretary. The company secretary is responsible for maintaining statutory registers, filing annual returns and other documents with the Registrar, and ensuring the company meets its administrative obligations. Nexora provides company secretarial services as part of our compliance packages.

Question 11

What are UBO (Ultimate Beneficial Owner) obligations?

Accepted Answer

Cyprus maintains a UBO register administered by the Registrar of Companies. Beneficial owners holding more than 25% of the company's shares or voting rights, or who otherwise exercise effective control, must be registered. Registration must be completed within 60 days of incorporation and updated within 14 days of any change. Failure to comply carries administrative and criminal penalties.

Question 12

Can a company be a shareholder in a Cyprus company?

Accepted Answer

Yes — corporate shareholders are permitted and common, particularly in holding structures. A Cyprus company can be wholly owned by a foreign holding company, or by a series of companies in different jurisdictions. The corporate shareholder will itself need to satisfy KYC requirements and disclose its own beneficial owners.

Question 13

What is the Cyprus corporate tax rate in 2026?

Accepted Answer

Following the landmark 2026 Cyprus Tax Reform (passed 22 December 2025, effective 1 January 2026), the headline corporate income tax rate increased from 12.5% to 15%. The change aligns Cyprus with the OECD Pillar Two global minimum tax framework. At 15%, Cyprus remains competitive within the EU — the rate matches the global minimum exactly, eliminating previous top-up tax exposure for most companies under the GloBE rules.

Question 14

What income is exempt from Cyprus corporate tax?

Accepted Answer

Key exempt categories — all preserved intact through the 2026 reform — include: dividends received by a Cyprus company (subject to conditions); profits from the disposal of securities (shares, bonds, debentures, and other qualifying instruments); profits of a permanent establishment outside Cyprus (subject to election); and gains from foreign exchange differences. These broad exemptions continue to make Cyprus extremely attractive as a holding and investment jurisdiction despite the rate increase.

Question 15

What changed with the Special Defence Contribution (SDC) in 2026?

Accepted Answer

The 2026 reform made major SDC changes. For dividends: the SDC rate for Cyprus-domiciled residents fell from 17% to 5% on profits earned from 1 January 2026 onwards (pre-2026 profits remain taxable at 17% until 31 December 2031). SDC on rental income was completely abolished. Additionally, the Deemed Dividend Distribution (DDD) mechanism — which previously imposed 17% SDC on undistributed profits after 2 years — is abolished for profits earned from 1 January 2026.

Question 16

Was stamp duty abolished in Cyprus?

Accepted Answer

Yes — stamp duty was completely abolished in Cyprus from 1 January 2026 (Law 239(I)/2025). The entire stamp duty regime has been repealed. This is a significant benefit for commercial transactions, loan agreements, share transfers, and corporate restructurings, all of which previously attracted stamp duty at varying rates. Documents signed before 31 December 2025 remain subject to the old rules.

Question 17

How is cryptocurrency taxed in Cyprus from 2026?

Accepted Answer

From 1 January 2026, Cyprus introduced a specific crypto asset taxation framework. Gains from crypto asset disposals are subject to a flat 8% tax rate. Losses are ring-fenced — they can only be offset against gains from other crypto assets in the same tax year; no carry-forward is permitted and no group relief is available. Crypto mining income is excluded from the 8% regime and taxed as ordinary income at the standard 15% corporate or personal income tax rate.

Question 18

What are the Cyprus capital gains tax rules after the 2026 reform?

Accepted Answer

Cyprus CGT continues to apply only to immovable property disposals and shares in property-holding companies. The 2026 reform lowered the 'property-rich' threshold from 50% to 20% — meaning shares in a company where 20% or more of its value derives from Cyprus immovable property are now subject to CGT on disposal. Lifetime CGT exemptions were significantly increased: general exemption raised from €17,086 to €30,000; agricultural land from €25,629 to €50,000; primary residence from €85,430 to €150,000. Gains on securities (shares, bonds, etc.) remain fully exempt provided the company is not property-rich.

Question 19

Can a Cyprus company benefit from double tax treaties?

Accepted Answer

Yes — Cyprus has an extensive tax treaty network covering over 65 jurisdictions. From 2025, new defensive measures (Laws 47(I)/2025 and 48(I)/2025) apply withholding taxes of 17% on dividends, interest, and royalties paid to associated companies in EU-blacklisted jurisdictions or low-tax jurisdictions (defined as those with CIT rates below 6.25%). These rules override treaty WHT relief where applicable. For standard treaty jurisdictions, full treaty protection applies.

Question 20

What are the corporate income tax filing obligations?

Accepted Answer

A Cyprus company must submit a provisional tax assessment in July and December of each tax year, and file an audited annual income tax return (IR4) by 31 March of the following year (extended deadlines apply for electronic filing). From 2026, all Cyprus tax residents aged 25+ must file a personal income tax return regardless of whether taxable income exists. Records must now be retained for 6 years from the submission deadline.

Question 21

What is the Pillar Two / Global Minimum Tax and does it affect my Cyprus company?

Accepted Answer

Cyprus enacted the OECD Pillar Two GloBE rules in December 2024. They apply only to multinational enterprise (MNE) groups with consolidated global turnover exceeding €750 million. The QIIR applies from FY2024; QUTPR and the Cyprus Domestic Minimum Top-Up Tax (DMTT) apply from FY2025. The 2026 CIT rate increase from 12.5% to 15% means most Cyprus entities in scope now meet the minimum rate — significantly reducing or eliminating top-up tax exposure. Approximately 100 companies in Cyprus are estimated to be in scope.

Question 22

When does a Cyprus company need to register for VAT?

Accepted Answer

Mandatory VAT registration is required when a company's taxable turnover exceeds €15,600 in any consecutive 12-month period. Immediate registration is also required when receiving or providing certain cross-border services to EU business customers (reverse charge mechanism), regardless of turnover. Voluntary registration is available below the threshold.

Question 23

What is VIES registration?

Accepted Answer

VIES — the VAT Information Exchange System — is an EU-wide database that allows businesses to verify the VAT registration status of their EU trading partners. Cyprus companies conducting intra-EU B2B transactions must register for VIES in addition to domestic VAT registration. VIES registration enables the zero-rating of qualifying supplies to VAT-registered businesses in other EU member states.

Question 24

Can a Cyprus company register for VAT before reaching the threshold?

Accepted Answer

Yes — voluntary VAT registration is possible and is frequently advisable for companies dealing with EU business clients, engaging in cross-border trade, or wishing to recover input VAT on business expenses. We assess the VAT position as part of every company formation engagement.

Question 25

What is the standard VAT rate in Cyprus?

Accepted Answer

The standard VAT rate in Cyprus is 19%. Reduced rates of 9% and 5% apply to specific categories of goods and services. A zero rate applies to qualifying exports, certain supplies to other EU member states, and some other specific transactions.

Question 26

What VAT returns does a Cyprus company need to file?

Accepted Answer

VAT-registered companies must file periodic VAT returns — typically quarterly — with the Tax Department of Cyprus. Returns must be filed and any VAT due paid by the 10th day of the second month following the end of each quarterly period. VIES declarations must also be submitted monthly or quarterly depending on transaction values.

Question 27

What are the ongoing compliance obligations for a Cyprus company?

Accepted Answer

Annual compliance obligations include: filing an annual return (HE32) with the Registrar; holding an annual general meeting; preparing audited financial statements; filing a corporate income tax return (IR4); maintaining all statutory registers (directors, shareholders, minutes, UBO); keeping the UBO register updated; and filing periodic VAT returns if VAT-registered. Failure to comply can result in penalties, striking off, and director liability.

Question 28

Are audited accounts required?

Accepted Answer

Yes — all Cyprus companies are required by law to prepare annual financial statements that are audited by a licensed Cyprus auditor, regardless of the company's size or turnover. There are no small company audit exemptions in Cyprus. Audited accounts must be approved by the shareholders and filed with the Tax Department.

Question 29

What is the annual return (HE32)?

Accepted Answer

The HE32 is the annual return that every Cyprus company must file with the Registrar of Companies. It confirms the company's registered particulars as at the date of the annual return, including: registered office address, directors, company secretary, shareholders and their shareholdings, and share capital. It must be accompanied by a filing fee.

Question 30

When must the annual return be filed?

Accepted Answer

The annual return must be filed with the Registrar of Companies within 28 days of the anniversary of the company's incorporation date each year. Late filing results in penalty fees. Persistent non-compliance can result in the company being struck off the register.

Question 31

What happens if a Cyprus company does not file its annual return?

Accepted Answer

If a company fails to file its annual return, the Registrar may issue a default notice and ultimately strike the company off the register, rendering it dissolved. Restoration is possible but involves a court application and is considerably more expensive than complying in the first place.

Question 32

What is the Cyprus IP Box regime and what changed in 2026?

Accepted Answer

The Cyprus IP Box provides an 80% notional deduction on qualifying profits from qualifying intellectual property. After the deduction, only 20% of qualifying IP income is subject to corporate tax. With the 2026 CIT rate increase from 12.5% to 15%, the effective IP Box rate shifts from ~2.5% to ~3% (20% × 15%). Critically, the IP Box regime itself — the 80% deduction, qualifying assets, OECD Nexus Approach, and eligibility conditions — remains fully unchanged. The 120% R&D super-deduction was affirmatively extended to 2030 as part of the reform.

Question 33

What IP assets qualify for the Cyprus IP Box?

Accepted Answer

Qualifying intellectual property assets under the modified nexus approach (OECD BEPS Action 5 compliant) include: patents, utility models, supplementary protection certificates, plant breeders' rights, and copyrighted computer software. Marketing-related intangibles — such as trademarks, brands, trade names, and customer lists — do not qualify. This list is unchanged by the 2026 reform.

Question 34

Do I need to have developed the IP myself?

Accepted Answer

The modified nexus approach requires that qualifying expenditure is incurred directly by the taxpayer. The company should genuinely engage in R&D activities. Acquired IP or IP entirely outsourced to related parties receives a reduced benefit proportional to the nexus fraction. R&D outsourced at arm's length to unrelated third parties qualifies as qualifying expenditure. This framework is unchanged post-2026.

Question 35

What is the nexus fraction?

Accepted Answer

The nexus fraction determines what proportion of qualifying IP profits benefit from the 80% deduction. Formula: (Qualifying Expenditure × 1.3) ÷ Overall Expenditure. Qualifying expenditure includes R&D directly incurred by the company and arm's length R&D outsourced to unrelated parties. The 1.3 uplift rewards companies with high proportions of own-R&D. The nexus fraction is unchanged by the 2026 reform.

Question 36

What types of income qualify for the IP Box?

Accepted Answer

Qualifying IP income includes: royalties, licence fees, and amounts in respect of IP rights; gains from the disposal of qualifying IP assets; and income embedded in the sale price of products or services where the IP contributes to the product (embedded royalties, as determined by a functional analysis). All qualifying income categories are unchanged by the 2026 reform. Income must be properly documented and the nexus fraction correctly computed.

Question 37

Is the Cyprus IP Box still competitive after the 2026 rate change?

Accepted Answer

Yes — at ~3% effective rate, Cyprus remains one of the most competitive IP Box jurisdictions in the EU and globally. The Netherlands (9%), Luxembourg (6.8%), Belgium (3.75%), and Ireland (10%) all have higher IP Box rates. The unchanged 80% deduction structure, combined with Cyprus's broad securities exemption, zero withholding taxes on outbound royalties, and 65+ tax treaties, means the overall proposition remains highly attractive for IP-holding structures.

Question 38

What is the Cyprus Tax Reform 2026?

Accepted Answer

Cyprus enacted its most comprehensive tax overhaul in 23 years. The main legislation was passed by Parliament on 22 December 2025 and published in the Government Gazette on 31 December 2025, with virtually all provisions effective 1 January 2026. Key changes: CIT rate 12.5% → 15%; SDC on dividends 17% → 5%; DDD abolished for 2026+ profits; stamp duty completely abolished; crypto taxed at 8% flat rate; CGT lifetime exemptions significantly increased; loss carry-forward extended from 5 to 7 years; and the 'not resident elsewhere' condition for the 60-day residency rule removed.

Question 39

Why did Cyprus raise the corporate tax rate?

Accepted Answer

The increase from 12.5% to 15% was driven by the OECD Pillar Two global minimum tax framework, which requires large multinational groups (revenue >€750M) to pay an effective rate of at least 15%. By raising the domestic CIT rate to 15%, Cyprus ensures that Cyprus entities within in-scope MNE groups meet the minimum rate domestically — eliminating the top-up tax that would otherwise be collected by the parent jurisdiction. For companies below the Pillar Two threshold (the vast majority of Cyprus companies), the increase simply means a higher headline rate.

Question 40

Has the Notional Interest Deduction (NID) changed?

Accepted Answer

The NID mechanism itself is fully preserved and unchanged. It still allows a notional deduction equal to a reference interest rate applied to new equity injected into the company. The maximum reduction of taxable income is capped at 80%, meaning the minimum effective CIT rate using NID is 20% of the headline rate — now 3% (20% × 15%, up from 2.5%). The tax authorities have signalled increased scrutiny of idle equity, circular flows, and year-end injections.

Question 41

What are the new transfer pricing thresholds for 2026?

Accepted Answer

The 2026 reform significantly raised Local File documentation thresholds. For financing transactions (loans, intercompany debt): the threshold increased from €750,000 to €5,000,000 per annum — a major reduction in compliance burden for routine treasury operations. For all other controlled transactions (goods, services, IP, management fees): the threshold increased from €750,000 to €1,000,000 per annum. The Summary Information Table (SIT) obligation continues for all controlled transactions regardless of value. The Council of Ministers now has power to revise thresholds by decree.

Question 42

What are the new defensive withholding tax rules?

Accepted Answer

From April 2025, Cyprus applies defensive withholding taxes to payments made to associated companies (≥50% ownership) in two categories: (1) EU-blacklisted jurisdictions (BLJ) — 17% WHT on dividends; 10% WHT on royalties. (2) Low-tax jurisdictions (LTJ) — defined as jurisdictions with a CIT rate below 6.25% (less than 50% of the new 15% rate). For LTJ recipients: 17% WHT on dividends from 1 January 2026; interest and royalties paid become non-deductible for CIT purposes. These rules override treaty WHT relief.

Question 43

What did Cyprus change for personal income tax in 2026?

Accepted Answer

Personal income tax bands were restructured. The zero-rate threshold increased from €19,500 to €22,000. All band thresholds were raised: 20% band now covers €22,001–€32,000 (was €19,501–€28,000); 25% band €32,001–€42,000 (was €28,001–€36,300); 30% band €42,001–€72,000 (was €36,301–€60,000); 35% rate applies above €72,000 (was above €60,000). Additionally, all Cyprus tax residents aged 25+ must now file a personal tax return regardless of income level.

Frequently Asked Questions

Company Formation

Directors & Shareholders

Tax

VAT

Annual Compliance

IP Box Regime

Tax Reform 2026

Speak With an Adviser