# Which Cyprus Structure: trading, holding, IP company, branch or redomicile

> Choose the right Cyprus vehicle for 2026. Compare a trading company, holding company, IP company, branch or moving your existing company on tax, substance and cost, with a structure chooser, dividend flow calculator and defensive measures check. Reviewed by ICPAC and ICAEW chartered accountants in Nicosia.

Publisher: Aqualis Ltd, Nicosia, CY. Members of ICPAC and ICAEW.
Last reviewed: 2026-10-14. Figures marked "Confirm" await adviser sign-off.
Canonical URL: https://cyprusstructure.com/

## Short answer

A Cyprus company pays 15% corporation tax from 2026. A holding company pays nothing on dividends received or on gains from selling shares, unless the shares draw value from Cyprus property. Cyprus withholds nothing on dividends, interest or royalties paid abroad, except to associated companies in EU-listed or low-tax jurisdictions, at 17%, 10% or 5%. Foreign dividends escape the 5% Special Defence Contribution unless the payer is mainly passive and taxed below 7.5%. Owners who are Cyprus non-doms pay 0% on dividends, domiciled residents 5%, both plus 2.65% healthcare. Qualifying IP profit is taxed at an effective 3%.

## Cyprus company structure tax rules, 2026

- **Corporation tax rate**: 15% on taxable profit from 1 January 2026, up from 12.5%. Losses carry forward for seven years (In law)
- **Company tax residence**: Resident if incorporated in Cyprus, or if managed and controlled in Cyprus, unless a tax treaty gives residence to the other country (In law)
- **Dividends received by a company**: Exempt from corporation tax, unless the paying company could deduct the dividend, in which case it is taxed at 15% (In law)
- **Special Defence Contribution on foreign dividends**: 0%, unless more than half of the payer's activity produces investment income and its foreign tax is below 7.5%. Then 5%, with credit for foreign tax withheld (In law)
- **Gains on shares and other securities**: Exempt, except shares deriving value from Cyprus property, which fall under 20% capital gains tax. The indirect test drops from 50% to 20% of the value (Confirm)
- **Withholding tax on payments abroad**: 0% on dividends and interest. Royalties 0% unless the rights are used in Cyprus, then 10% (5% for films), reducible by treaty or EU directive (In law)
- **Defensive measures, EU-listed jurisdictions**: To associated companies: 17% on dividends and interest, 10% on royalties. Applies where listed at payment and in the previous calendar year (Confirm)
- **Defensive measures, low-tax jurisdictions**: To associated companies where tax is below 7.5%: 5% on dividends, and interest and royalties paid are not deductible. Eleven jurisdictions on the April 2026 list (Confirm)
- **EU list of non-cooperative jurisdictions**: Ten since 17 February 2026: American Samoa, Anguilla, Guam, Palau, Panama, Russia, Turks and Caicos, US Virgin Islands, Vanuatu, Viet Nam. Next review due October 2026 (Confirm)
- **Dividends to Cyprus resident owners**: Special Defence Contribution 0% for non-doms, 5% for domiciled residents, plus General Healthcare System 2.65% up to €180,000. Pre-2026 profits paid to domiciled residents stay at 17% until 2031 (Confirm)
- **Foreign permanent establishment**: Profit exempt, subject to the same passive income and 7.5% tests. No exemption from 2026 where the establishment sits in an EU-listed jurisdiction (In law)
- **Branch of a foreign company**: Cyprus profit taxed at 15%. No Cyprus tax on sending profit to head office. No access to Cyprus treaties for the branch (In law)
- **Controlled foreign company rules**: Undistributed income of a controlled, low-taxed company is taxed in Cyprus only where it comes from non-genuine arrangements. Low tax read as below 7.5% from 2026 (Confirm)
- **Notional interest deduction**: Survives 2026. A deduction on new equity at a reference bond yield plus a premium, capped at 80% of the profit from that equity. 2026 yields published March 2026 (Confirm)
- **IP box**: 80% of qualifying profit from patents and software exempt, an effective 3% at the 15% rate, in proportion to R&D done in-house or by unrelated parties (In law)
- **Tax treaties**: 65 or more in force, including the 2018 UK treaty, the 1984 US treaty and India. Oman effective 2026 (In law)

## How to set up a Cyprus structure

1. **Map the group.** Who owns what, where profit is earned, where the decision makers live, and what each flow is: dividends, royalties, interest or trade.
2. **Model and choose.** Run each dividend, royalty and interest flow through the rates, the defensive measures and the home-country rules, then pick the vehicle.
3. **Form or move.** Incorporate the Cyprus company, register a branch, or start the continuation of your existing company. Register for tax and open the bank account.
4. **Build substance and file.** Hold board meetings in Cyprus, keep minutes, staff the office in proportion to the activity, and apply for a tax residence certificate.

## Free tools on this page

- **Cyprus structure chooser**: Recommends a Cyprus vehicle and one alternative (trading company, holding company, IP company, branch, redomiciled company, investment or finance company) from the purpose, owner status, location of subsidiaries or customers, need for EU access and any existing foreign company, and draws the structure with the 2026 tax rate on each flow.
- **Cyprus holding company dividend flow calculator**: Calculates, step by step, subsidiary corporate tax, withholding tax into Cyprus, Cyprus corporation tax and Special Defence Contribution at the holding company, Special Defence Contribution and General Healthcare System on the distribution to the owner, and the net amount the owner receives.
- **Cyprus outbound payments defensive measures check**: Checks a dividend, interest or royalty payment from a Cyprus company against the 2026 defensive measures for EU-listed and low-tax jurisdictions and returns the Cyprus withholding tax rate and amount, any denied deduction and its cost at 15%, with notes.

## Questions and answers

### Is a Cyprus holding company still worth it after the 2026 tax reform?

For most groups, yes. The rate rise to 15% does not touch dividends received or gains on shares, which stay exempt, and Cyprus still withholds nothing on dividends paid out. The reform also removed the deemed dividend charge and stamp duty. It is worth less where subsidiaries are passive and low-taxed, or where the owners live in a country that taxes the dividends anyway.

### Do Cyprus companies pay tax on dividends from foreign subsidiaries?

Normally no. Dividends are exempt from corporation tax unless the paying company could deduct them. They are also exempt from the Special Defence Contribution unless the payer is mainly passive and taxed below 7.5%. Cyprus has no minimum shareholding or holding period for this.

### When does the 5% Special Defence Contribution apply to foreign dividends in Cyprus?

Only when both tests fail: more than half of the paying company's activities produce investment income, and its foreign tax burden is below 7.5%, which is half the Cyprus rate. Then 5% applies, down from 17% before 2026, with credit for foreign tax withheld on the dividend.

### Is there withholding tax on dividends paid from Cyprus to non-residents?

No, with one exception. Dividends paid to associated companies in EU-listed jurisdictions carry 17%, and to associated companies in low-tax jurisdictions 5% from 2026. Dividends to individuals abroad and to companies in normal-tax countries carry no Cyprus withholding tax.

### Which countries are on the EU blacklist that Cyprus uses for defensive measures?

Since 17 February 2026: American Samoa, Anguilla, Guam, Palau, Panama, Russia, Turks and Caicos, the US Virgin Islands, Vanuatu and Viet Nam. Cyprus applies its measures where a jurisdiction is listed at the time of payment and was listed in the previous calendar year, so the two February additions may only come into scope in 2027. The list is reviewed every February and October.

### Is my Cyprus company tax resident if it is managed from abroad?

Under Cyprus law, yes: from 2026 incorporation in Cyprus is enough. But if the other country also treats it as resident because decisions are taken there, the treaty tie-breaker usually hands residence to the place of effective management. A Cyprus company run from Berlin is likely to end up German resident for treaty purposes.

### Should I open a Cyprus branch or a Cyprus subsidiary?

A branch is quicker and suits a trial or a single project. It pays 15% on Cyprus profit and can send profit home tax free, but it cannot use Cyprus treaties or the EU directives and offers no liability shield. A subsidiary costs more to run and must be audited, but it is a separate EU company in its own right.

### Can I move my existing company to Cyprus without closing it?

Yes, if your current country allows companies to leave and the company's form matches a Cyprus company. Cyprus law lets a foreign company continue here as the same legal person, keeping its contracts and history. From 2026 its assets enter Cyprus at market value for tax, whether it comes from the EU or elsewhere. Your current country may charge exit tax.

### Do Cyprus controlled foreign company rules apply to my holding company?

Only if the holding company controls a foreign company that pays less than half the tax it would pay in Cyprus, and that company's income comes from arrangements that are not genuine. Small companies with accounting profit under €750,000 and non-trading income under €75,000 are outside the rules. Trading subsidiaries with their own people are rarely affected.

### Is the notional interest deduction still available in Cyprus in 2026?

Yes. The reform kept it, and the Tax Department published the 2026 reference bond yields in March 2026. It gives a deduction on new equity used in the business, capped at 80% of the taxable profit that equity produces. At 15% it is worth a fifth more per euro than at 12.5%.

### Are gains on selling shares tax free in Cyprus?

Gains on shares, bonds and similar securities are exempt for companies and individuals, with no holding period. The exception is shares in companies whose value comes from property in Cyprus. From 2026 that test applies at 20% of value, down from 50%, and the gain attributable to the property is taxed at 20% capital gains tax.

### What tax does a Cyprus non-dom pay on dividends from their own company?

No Special Defence Contribution, and no income tax on the dividend. The only charge is the General Healthcare System at 2.65%, on total income up to €180,000 a year, so it stops at €4,770. Non-dom status lasts 17 of the last 20 years of residence, with a paid extension available.

### How much substance does a Cyprus holding company need?

Enough that a tax inspector in the subsidiary's country would accept that Cyprus is where decisions are made. In practice that means Cyprus resident directors who decide, board meetings here, a Cyprus bank account and costs that match the activity. A pure holding company needs far less than a trading or IP company, but never nothing.

### Is Cyprus the right choice if my customers are all outside the EU?

Not always. If you do not live in Cyprus and will not put people here, a Cyprus company is likely to be treated as resident where you run it. Cyprus earns its place when you or your team relocate, when you hold EU subsidiaries, or when its treaties cut withholding tax on what you receive.

## Contact

Aqualis Ltd, https://www.aqualis.com.cy