Cyprus corporate tax 2026 reform: what changed (and what it means for IP)

What the 2026 Cyprus tax reform is, in one paragraph

From 2026 Cyprus’s corporate income tax rate is 15%. The IP Box’s 80% deduction can produce a 3% corporate result on eligible net income at full nexus. Personal dividend rules, the additional R&D deduction and Pillar Two need separate checks.

What changed on 1 January 2026

For resident domiciled individuals, the 5% SDC treatment concerns relevant dividends from profits earned from 2026; older profits require transitional analysis. Non-dom relief is a separate personal-status question. Outgoing dividends are not universally free of withholding: defensive rules can apply to specified recipients in blacklisted or low-tax jurisdictions.

For 2025–2030, the additional 20% R&D deduction is subject to Article 9(1)(δ). It excludes expenditure on an intangible asset for which IP Box relief has been applied in any tax year, including the current year. Check the asset’s history and deduction timing; this is not merely a rule against counting one invoice twice.

Why 15%? Pillar Two and the global minimum

Assess consolidated group revenue of at least €750 million in at least two of the four preceding financial years, together with the detailed scope rules. A small subsidiary can belong to an in-scope group. Pillar Two uses a separate income and covered-tax calculation; the ordinary 15% corporate rate does not itself eliminate top-up exposure.

What stayed intact

QE is qualifying R&D, A is acquisition cost and R is related-party R&D. OE = QE + A + R. UE = min(30% × QE, A + R). Nexus = min(1, (QE + UE) / OE), where OE is positive. Use the asset’s relevant historical expenditure; the denominator is not every accounting expense.

Non-dom status depends on domicile and residence history, not nationality alone. The deemed-domicile test refers to residence in at least 17 of the preceding 20 years. Eligible individuals may use the conditional Article 3D extension mechanism for two five-year periods at €250,000 per period; it is not automatic.

Action points

Model company and shareholder separately. With €100,000 qualifying net IP income, full nexus and no other adjustments, corporate tax is €3,000. If the €97,000 dividend is fully subject to 2.65% GHS within an unused ceiling and exempt from SDC, GHS is €2,570.50: an illustrative combined €5,570.50, not a universal 5% rate.