CYPRUS Law and Practice Contributed by: Stella Strati, Patrikios Legal
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Businesses in Cyprus generally adopt a corporate form. The most common type of corporate form is that of a private (or public) limited liability company with shares. A Cypriot company is fiscally opaque for tax purposes; therefore, it is taxed as a separate legal entity. Pursuant to Cyprus law, a company is a legal per - son with a separate legal personality, distinct from its members and its directors. Thus, its shareholders are not personally liable for the obligations of the com - pany and the liability of the shareholders is limited to their share capital contribution. The existence of the company does not depend on the existence or continuation of its members. Additionally, a Cyprus company may be limited by guarantee. Usually, companies limited by guarantee are incorporated as non-profit organisations in order to pursue charitable purposes. 1.2 Use and Taxation of Transparent Business Structures Cyprus law allows for the establishment of general and limited partnerships. A partnership is not treated as a separate taxable person. It is a transparent entity and the tax is imposed on the partners rather than on the partnership. Partnerships are widely used in joint venture projects and in smaller (usually family-owned) businesses. 1.3 Tests for Determining Tax Residence As per the provisions of the Cyprus income tax law, a legal person is considered to be a Cyprus tax resident if its management and control are exercised in Cyprus or if it was incorporated as a Cyprus company pursu - ant to the provisions of the Cyprus Companies Law or transferred its legal seat or registered office from abroad to Cyprus. The tax legislation does not include a clear definition of the “management and control” test. The minimum requirements for an entity to be considered a Cyprus tax resident are quite general and include:
• the place of residence of the majority of the direc - tors; • the place where the meetings of the board of direc - tors are held; and • the place where the general policy of the entity is formulated. 1.4 Applicable Corporate and Individual Tax Rates The applicable tax rate for corporations is 15% as from 1 January 2026. Income for individuals is subject to progressive tax rates: • The first EUR22,000 is tax-free. • From EUR22,001 to EUR32,000, the applicable tax rate is 20%. • From EUR32,001 to EUR42,000, the applicable tax rate is 25%. • From EUR42,001 to EUR72,000, the income is taxed at 30%. • Any amount above EUR72,001 is taxed at 35%. A number of deductions and personal allowances are available, and these include allowances based on specific family thresholds. Gains arising from the sale, gift, exchange or use of a crypto-asset are subject to a flat rate of 8%. This provision is applicable as of 1 January 2026. Businesses owned directly by individuals are subject to the individual tax rates. The same applies to busi - nesses owned through transparent entities.
2. Corporate Tax Regime 2.1 Taxable Profits
Business profits of a Cypriot company, adjusted for various disallowances and exemptions, are subject to tax at 15%. Cyprus tax residents are taxed on their worldwide income. Profits are taxed on an accrual basis and the International Financial Reporting Stand - ards are followed.
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