Jurisdiction Profile

Cyprus Jurisdiction: EU Island with IP Box and Non-Dom Regime

Cyprus is one of the most discussed EU jurisdictions for tax-efficient corporate structures. The combination of the IP Box regime, non-dom status, and the 60-day rule makes the island particularly interesting for tech-driven entrepreneurs. Following the CIT increase to 15% in January 2026, the landscape has changed.

Fact-based assessment · Based in Malta since 2013

Corporation Tax: 15%; Since 1 January 2026 (previously 12.5%)
Effective IP Box: ~3%; On qualifying IP income
Non-Dom Duration: 17 years; No SDC on dividends and interest; extendable against a lump sum
EU Member: Since 2004

Last updated: October 2026

At a Glance

Cyprus offers a three-tier tax model with 15% corporation tax, an EU-compliant IP Box regime (effective rate of approx. 3%), and non-dom status. The 60-day rule allows for tax residency with minimal physical presence. However, following the CIT increase under the 2026 tax reform, the standard rate now sits at the level of the global minimum tax. For entrepreneurs without their own intellectual property, the tax advantage compared to other EU jurisdictions has diminished. Cyprus's greatest strength remains its IP Box regime, which ranks among the most attractive in the EU.

Key Facts

Key Facts at a Glance

Corporation Tax: 15%; Since 1 January 2026 (previously 12.5%)
IP Box Regime: Effective approx. 3%; 80% exemption on qualifying IP income, nexus approach required
Non-Dom Regime: 17 years without SDC; Dividends and interest (GeSY 2.65% applies); then extendable against EUR 250,000 per 5 years (max. 10 years)
Tax Residency: 60-day rule; Cumulative: 60 days in Cyprus, max. 183 days in any other single country, business activity and home in Cyprus
Income Tax (PIT): Progressive up to 35%; Tax-free up to EUR 22,000 since 2026, 35% above EUR 72,000; 50% exemption for new arrivals earning over EUR 55,000 (17 years)
DTT with UK: Active; Comprehensive DTT network with over 65 agreements worldwide
Company Formation: 5 to 10 working days; Often possible entirely remotely; common law legal tradition
EU Member: Since 2004; Access to the EU single market, free movement of capital

What sets Cyprus apart as an EU jurisdiction

Over the past two decades, Cyprus has established itself as a serious EU jurisdiction for international entrepreneurs. The island combines a common law legal system in the English tradition with EU membership, a broad network of double tax treaties, and a tax system built on simplicity. Unlike many EU countries, Cyprus applies a flat-rate approach to corporation tax: 15% on profits, without complex refund mechanisms or special approvals.

For tech-driven companies, the IP Box regime is the main draw. Income from qualifying intellectual property - software, patents, utility models - is taxed at an effective rate of approx. 3%; trademarks are excluded. This is one of the lowest rates within the EU and follows the OECD-compliant nexus approach: the benefit only applies to the extent that the company bears the research and development itself or outsources it to unrelated third parties.

The non-dom regime complements the system on a personal level: tax residents without a Cypriot domicile pay no Special Defence Contribution (SDC) on dividends and interest. The status ends once you have been resident in Cyprus for 17 of the last 20 years; since 2026, the SDC exemption can then be extended against a lump sum. This makes Cyprus particularly attractive for entrepreneurs receiving income from international holdings.

Add to this its geographical location in the eastern Mediterranean, making Cyprus a bridge between Europe, the Middle East, and North Africa. English is the standard language for business, and setting up a Cypriot company typically takes 5 to 10 working days.

The Cypriot tax system

The Cypriot tax system rests on three pillars that together form its competitive advantage: the corporation tax rate, the IP Box regime, and the non-dom status.

Since 1 January 2026, the corporation tax rate has been 15%. Cyprus raised the rate from the previous 12.5% as part of its tax reform, bringing it to the level of the global minimum tax (OECD Pillar Two). Pillar Two itself legally applies only to groups with a consolidated annual turnover of EUR 750 million or more, which most international entrepreneurs are below; the new standard rate, however, applies to all companies. This means the standard tax rate is solid, but no longer a unique selling point within the EU.

The IP Box regime is Cyprus's true tax strength. Qualifying income from intellectual property is 80% exempt from taxation, resulting in an effective tax burden of approx. 3% given the 15% corporation tax rate (until 2025, at 12.5%: approx. 2.5%). Qualifying assets include patents, copyrighted software, utility models, and certain other intangible assets; trademarks and other marketing-related IP are excluded. The nexus approach is crucial here: the benefit is only available to the extent that the taxpayer carries out the underlying research and development itself or outsources it to unrelated third parties.

The non-dom status exempts tax residents from the Special Defence Contribution (SDC) on dividends and interest. It ends once you have been tax resident in Cyprus for 17 of the last 20 years. Since 2026, the SDC exemption can then be extended against a lump sum of EUR 250,000 per five-year period, for at most two periods. Contributions of 2.65% to the GeSY healthcare system (capped at EUR 180,000 of annual income) still apply to dividends and interest for non-doms. Royalties are not covered by non-dom status; they are subject to regular income tax. Combined with a Cypriot holding company receiving dividends from international subsidiaries, this allows for a highly efficient structure.

Personal income tax follows a progressive scale up to 35%. Since the 2026 tax year, the first EUR 22,000 is tax-free (previously EUR 19,500); above that, the rate rises in steps of 20%, 25% and 30% to 35% on income over EUR 72,000. Anyone taking up their first employment in Cyprus with a salary above EUR 55,000 a year, who was not resident in Cyprus for at least 15 consecutive years beforehand, can exempt half of that salary for 17 years - a strong incentive for qualified professionals.

Residence and tax residency

Cyprus's tax residency rules are among the most flexible in the EU. Alongside the traditional 183-day rule, there is the 60-day rule, which makes Cyprus particularly interesting for entrepreneurs who do not wish to live there full-time.

The 60-day rule requires the taxpayer to (a) spend at least 60 days per calendar year in Cyprus, (b) not spend more than 183 days in any other single country, (c) carry on a business, be employed or hold a directorship in Cyprus, and (d) maintain an owned or rented permanent home in Cyprus. All conditions must be met cumulatively. Since 2026, tax residency in another country no longer rules out the 60-day rule; dual residency is then resolved under the relevant double tax treaty.

In practice, the 60-day rule sounds tempting but is increasingly subject to strict scrutiny. HMRC applies the Statutory Residence Test (SRT) strictly. Genuine relocation must be demonstrated under the SRT ties tests. Without genuine substance on the ground - a home, family, social integration - there is a significant risk that your UK tax residency will remain unbroken. The 60-day rule establishes Cypriot residency, but it does not automatically sever your UK tax obligations.

No visa is required for EU citizens. Third-country nationals, including UK citizens post-Brexit, can obtain permanent residency through various programmes, such as the Cyprus Permanent Residency Programme (requiring a property investment of approx. EUR 300,000). However, the Cypriot residence permit does not grant the right to reside in other EU countries - it is valid only for Cyprus.

“Cyprus is a strong EU jurisdiction, especially for IP-driven business models. But the CIT increase to 15% has reshuffled the deck. If you do not bring your own intellectual property, Malta offers a more tax-efficient structure. We will look at the numbers together during our initial consultation and assess what truly fits your situation.”

Dr. Jörg Werner

Founder, Dr. Werner & Partners

Contrasting landscapes of Cyprus and Malta

Reality check: Daily life for international entrepreneurs

Cyprus offers a pleasant Mediterranean standard of living, and daily life is generally easy to organise for international entrepreneurs. The official languages are Greek and Turkish, but English is ubiquitous in business and everyday life. Most dealings with authorities, banking meetings, and contract negotiations are conducted in English. An English-speaking advisory infrastructure is well-established, though the international expat community is somewhat smaller than in Malta.

The property market has changed in recent years. Limassol, the preferred city for international business owners, has experienced a property boom. Monthly rents for high-quality apartments range between EUR 1,500 and EUR 3,000, and purchase prices have risen significantly, especially near the coast. Paphos and Larnaca offer more affordable alternatives with slightly less international infrastructure.

The banking situation requires an honest assessment. Following the 2013 financial crisis, where deposits over EUR 100,000 at Laiki Bank and Bank of Cyprus were partially bailed in, the sector has stabilised. The remaining banks are EU-regulated and subject to ECB supervision. Nevertheless, the banking sector is smaller and less internationally oriented than Malta's. For larger wealth or complex international structures, entrepreneurs occasionally report lengthy compliance checks during account opening.

Healthcare is provided through the GeSY system (General Healthcare System) introduced in 2019, which gives all residents access to public and private medical care. The quality in larger cities is good; for specialised treatments, many expats use private clinics or travel to Israel or Greece.

The infrastructure is solid: two international airports (Larnaca and Paphos), stable internet connections, and a pleasant climate with over 300 days of sunshine a year. The island is accessible via direct flights from major UK airports, with a flight time of approximately 4.5 hours from London.

Assessment: How Malta differs

As a law firm based in Malta, we provide an honest assessment of the differences between the two jurisdictions. Both have been EU members since 2004, both are located in the Mediterranean, and both offer low tax rates. However, their systems differ fundamentally in architecture.

The effective corporation tax burden is the most obvious difference: Cyprus taxes at a flat rate of 15%, while Malta achieves an effective rate of 5% through its 6/7 shareholder refund system. For companies without their own intellectual property - which includes the majority of trading, service, and consulting businesses - Malta is significantly more tax-efficient. Cyprus's IP Box regime (effective approx. 3%) can reverse this advantage for IP-driven business models, but it requires genuine research and development borne by the company itself. Malta has its own narrowly defined regime, the Patent Box (effective corporate tax as low as 1.75%; trademarks excluded), so IP-driven businesses should compare both regimes.

Regarding the non-dom regime, there is a crucial timeframe difference: Cyprus's SDC exemption on dividends and interest ends once you have been resident in Cyprus for 17 of the last 20 years. Since 2026, it can be extended for up to ten years against a lump sum of EUR 250,000 per five years; after that, SDC applies. Malta offers a permanent alternative with its remittance basis: non-doms only pay tax on income remitted to Malta and on income arising in Malta. There is no time limit.

Malta's refund system is sector-neutral and does not require restriction to specific types of income. Whether trading, consulting, technology, gaming, or financial services - the effective 5% burden applies universally. Cyprus's lowest rates are tied to the IP Box regime and are therefore restricted to a specific income type.

On a personal level, Malta offers the Global Residence Programme (GRP) and similar schemes with a flat tax rate of 15% on foreign income remitted to Malta (minimum tax EUR 15,000). For entrepreneurs seeking a predictable personal tax burden, this can be an advantage over the Cypriot progressive scale.

We are not saying Malta is always the better choice. For IP-driven companies with their own research and development, Cyprus can be the more tax-attractive solution. However, for the majority of UK and international entrepreneurs without proprietary IP, Malta offers a lower effective tax burden and a more stable long-term structure.

The 2026 CIT increase: What it means for international entrepreneurs

On 1 January 2026, Cyprus raised its corporation tax rate from 12.5% to 15%. The adjustment is part of the Cypriot 2026 tax reform and brings the rate to the level of the global minimum tax of 15% (OECD Pillar Two), which legally applies only to groups with a consolidated annual turnover of EUR 750 million or more.

For most international entrepreneurs, turnover is well below this threshold. The Pillar Two rules are therefore not directly relevant to them. Nevertheless, the new 15% standard rate applies to all Cypriot companies.

The practical impact: anyone who previously calculated with 12.5% corporation tax in Cyprus must update their structural planning. The difference of 2.5 percentage points can be substantial for higher profits. At the same time, the tax gap with Malta has widened: Malta's effective 5% (after refund) is now compared against 15% in Cyprus - instead of the previous 12.5%.

For entrepreneurs already resident in Cyprus, little changes apart from the higher tax rate. The IP Box regime is unchanged, but at the new rate it results in an effective approx. 3% instead of 2.5% on qualifying income. The non-dom status remains and, since 2026, can be extended against a lump sum once it expires. The 60-day rule has been redefined: tax residency in another country no longer rules it out. However, anyone currently weighing up whether Cyprus or another EU jurisdiction is the better fit should factor the new tax burden into their overall calculation.

Location Comparison

Direct Comparisons with Malta

Our Process

01
Free Jurisdiction Analysis
In our initial consultation, we analyse your business model, income structure, and personal situation. We assess whether Malta or another EU jurisdiction is the better fit for your goals.
02
Tax Structuring
Based on the analysis, we develop the optimal corporate structure: holding company, operating company, refund planning, and personal tax residency in Malta.
03
Company Formation Malta
We handle the complete formation of your Maltese company: registration, articles of association, director appointment, and registry filing.
04
Bank Account and Infrastructure
Opening an account with a Maltese or international bank, setting up bookkeeping, and preparing for ongoing compliance requirements.
05
Ongoing Support
Annual financial statements, tax returns, refund applications, director duties, and ongoing advice on regulatory changes or structural adjustments.

Your situation deserves an individual analysis.

In a free initial consultation, we assess whether and how Malta works for you.

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Your Contact

Horst Wickinghoff

Senior New Business Manager

Company Formation
Tax Structuring

Christine Ann Galea

Tax Transformation Leader

Tax Advisory

Frequently Asked Questions

Transparency matters to us. Here you will find answers to the most common questions on this topic.

What is the corporation tax rate in Cyprus since 2026?

Since 1 January 2026, the Cypriot corporation tax rate has been 15%. Cyprus raised the rate from the previous 12.5% as part of its tax reform, to the level of the global minimum tax (OECD Pillar Two). The IP Box regime itself is unchanged (80% exemption); at the new rate it results in an effective approx. 3% instead of the previous approx. 2.5%.

What is the 60-day rule and how does it work?

The 60-day rule allows you to become tax resident in Cyprus by spending just 60 days a year there. The prerequisites are that you spend no more than 183 days in any other single country, carry on a business, are employed or hold a directorship in Cyprus, and maintain an owned or rented permanent home on the island. All conditions must be met simultaneously. Since 2026, tax residency in another country no longer prevents you from using it. Important: while this establishes Cypriot residency, it does not automatically sever your UK tax obligations under HMRC's Statutory Residence Test.

How long does the non-dom status last in Cyprus?

The non-dom status in Cyprus ends once you have been tax resident there for 17 of the last 20 years. Until then, you pay no Special Defence Contribution (SDC) on dividends and interest; royalties are not covered. Non-doms still pay GeSY contributions of 2.65% (capped at EUR 180,000 of annual income). Since 2026, the SDC exemption can then be extended for up to ten years against a lump sum of EUR 250,000 per five years. Malta's remittance basis offers an exemption without a time limit.

Which companies benefit most from Cyprus?

Cyprus is particularly attractive for companies with their own intellectual property - software, patents, utility models - that can benefit from the IP Box regime (effective approx. 3%; trademarks are excluded). Entrepreneurs who live primarily on dividends and interest also benefit from the non-dom status. For trading and service companies without IP, Malta generally offers the more cost-effective structure with an effective 5% corporation tax rate.

Does DW&P also provide advice on Cyprus?

We advise exclusively on Malta, but we understand the starting position of entrepreneurs weighing up Cyprus and Malta. In a free initial consultation, we analyse your business model and assess whether Malta is the right fit for your situation. If Cyprus is objectively the better choice - for example, with a pure IP model - we will tell you openly.

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