Cyprus fundamentally reformed its tax law on 1 January 2026 – and preserved what makes the island so attractive for entrepreneurs and newcomers: the non-dom status. Corporate tax now stands at 15%, while levies were abolished, allowances raised and the residence rules simplified. Anyone choosing Cyprus for company formation and relocating there can combine both: with non-dom status, dividends and interest are exempt from the special defence contribution for up to 17 years.
The 2026 tax reform
With its tax reform effective from 2026, Cyprus modernised its tax law and made it noticeably simpler for entrepreneurs and individuals. Corporate tax has since been 15%, in line with the international minimum level. In return, deemed dividend distribution and stamp duty were abolished, the defence contribution on dividends for Cyprus-domiciled persons was cut to 5%, and the tax-free allowance for individuals was raised to €22,000; the top rate of 35% only applies above €72,000.
Dividends that a Cypriot company receives from its subsidiaries remain tax-free under the participation exemption. Cyprus therefore remains a sought-after location for holding companies.
Non-dom: tax-free dividends
The heart of Cyprus’s appeal is the non-dom status. Anyone who becomes tax resident in Cyprus without being domiciled there pays no defence contribution on dividends and interest – distributions flow without this levy. As dividends are not subject to income tax in Cyprus, they are largely tax-free for non-doms; only the 2.65% contribution to the national health system applies, capped at €4,770 per year.
The status applies for up to 17 years. The 2026 reform also created an option to extend the benefits beyond this period against a lump-sum payment. For entrepreneurs who opt for company formation in Cyprus or receive profits from their own company abroad, this is one of the strongest advantages any EU country offers.
Residence from 60 days
You become tax resident in Cyprus by spending more than 183 days a year there – or by using the 60-day rule. It requires a stay of at least 60 days, a business activity or employment in Cyprus, for example as director of your own company, and an owned or rented home on the island. The former condition of not being tax resident in any other country was removed with the 2026 reform.
This makes a residence in Cyprus particularly suitable for entrepreneurs who travel a lot and still want a clear, legally secure residence in the EU – with a Mediterranean climate, English-speaking everyday life and short flights to the rest of Europe.
Combining with a company abroad
A Cyprus residence combines particularly well with a company in a country that taxes neither the company’s foreign profits nor its distributions. The company earns its profits tax-free there, and when they flow as dividends to a non-dom in Cyprus, no income tax or defence contribution is due in Cyprus either. The comparison of proven locations for such a company abroad shows the concrete total burden, including withholding tax and the health contribution:
| Company in | Tax on profit | Withholding tax on dividends | Health contribution in Cyprus | Total burden |
|---|---|---|---|---|
| Singapore | 0% on foreign profits | 0% | 2.65% | 2.65% |
| Hong Kong | 0% on foreign profits | 0% | 2.65% | 2.65% |
| Dubai (free zone) | 0% on qualifying income | 0% | 2.65% | 2.65% |
| Bulgaria | 10% | 5% | 2.65% | approx. 16.9% |
| Cyprus itself | 15% | 0% | 2.65% | approx. 17.3% |
The total burden covers all taxes and levies from the company’s profit to the dividend received by the shareholder. The health contribution is capped at €4,770 per year – so for income above €180,000 the total burden falls further. Which location works best for this combination depends on the business model and should be decided together with the residence planning – resulting in a coherent overall structure.
The formation process
Anyone planning to set up a company in Cyprus follows a clear process:
- Have the company name approved by the Registrar of Companies.
- Draft the articles: the Memorandum and Articles of Association govern shares, bodies and purpose.
- Appoint director, company secretary and registered office: the company needs an address in Cyprus.
- Register with the Registrar of Companies: the company comes into existence on registration.
- Tax registration: within 60 days, registration with the tax authority follows, and for VAT if required.
With complete documents, the company is usually fully operational within a few weeks.
Accounting and obligations
The key obligations for bookkeeping, accounts, audit and VAT at a glance – so you know from the start what running your company involves.
| Obligation | Rule |
|---|---|
| Bookkeeping | Under IFRS |
| Annual accounts | Annually, audited, with the annual return (HE32) |
| Statutory audit | Required for all companies, regardless of size |
| Tax return | Annual corporate tax return (TD4) with audited accounts |
| VAT: registration | From €15,600 turnover in twelve months; rate 19% |
| VAT: returns | Quarterly |
| Ongoing register duties | Annual return and annual registry levy of €350 |
Registration with the tax authority follows within 60 days of formation; accounts and the annual return are filed with the Registrar of Companies. With an experienced local accountant, these obligations are routine.
As of 2026. Bookkeeping and filings are usually handled by specialised accountants in the target country.
Is a Cypriot company right for you?
Whether a Cypriot company is right for you depends above all on whether you also move your own residence to Cyprus:
Suitable for
- Newcomers who benefit from non-dom status
- Holding companies with investments abroad
- Owners of a company in a country with no profit tax
- Families who want to live by the sea in the EU
Less suitable for
- Founders looking for a tax rate below 15%
- Micro-businesses without budget for the annual audit
- Traders with warehouses and logistics in Central Europe
- Projects that need a company within days
If you are also looking for a non-dom residence in the EU, compare Malta; for the company itself, locations such as Singapore and Hong Kong offer tax-free foreign income, and within the EU Bulgaria with 10% corporate tax is an alternative. All options are listed in the overview of all locations, and the tax comparison shows the rates side by side. Which structure fits in an individual case can be clarified in an initial consultation.
