Cyprus מס חברות Guide 2026: Rates, Exemptions & Planning

The Cyprus מס חברות Framework

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

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

[HE] Exempt Income

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

[HE] Deductible Expenses

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

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

[HE] Trading Loss Relief

[HE] 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. Cyprus does not allow loss carry-back.

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

עמוד שני: What It Means for Cyprus Companies

The EU דקimum Tax Directive requires Cyprus to apply a Qualified Domestic דקimum 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 דקimum 15% effective tax rate on Cyprus-source profits. The OECD עמוד שני framework sets the global דקimum standard.

For companies below the €750 million threshold — which is the vast majority of Cyprus companies — עמוד שני 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 Cyprus parent is not large if the global group exceeds the threshold.