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

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% to account for the EU-wide implementation of the OECD Pillar Two directive. Although the Pillar Two threshold applies to a consolidated annual turnover of EUR 750 million and most international entrepreneurs fall below this, Cyprus opted for a preventive adjustment. 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. 2.5% given the 15% corporation tax rate. Qualifying assets include patents, copyrighted software, trademarks, and certain other intangible assets. The nexus approach is crucial here: the benefit is only available to the extent that the underlying research and development activity actually takes place in Cyprus or is carried out by the taxpayer themselves.

The non-dom status exempts tax residents from tax on foreign dividends, interest, and royalties - for up to 17 years after obtaining tax residency. There is no minimum tax amount and no lump-sum 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%. Income up to EUR 19,500 is tax-free. For employees moving to Cyprus for the first time, there is a 50% exemption on income over EUR 55,000 - a strong incentive for qualified professionals.

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.

On 1 January 2026, Cyprus raised its corporation tax rate from 12.5% to 15%. The adjustment was made in the context of the EU-wide implementation of the OECD Pillar Two directive, which mandates a global minimum tax of 15% for companies with a consolidated annual turnover exceeding EUR 750 million.

For most international entrepreneurs, turnover is well below this threshold. The Pillar Two rules are therefore not directly relevant to them. Nevertheless, Cyprus raised the rate preventively - to avoid being perceived internationally as a tax haven and to anticipate compliance with European directives.

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 remains in place, continuing to offer an effective rate of approx. 2.5% on qualifying income. The non-dom status and the 60-day rule are also unaffected. 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.