Tax Incentives for Foreign Investment in Cyprus
Cyprus has long been a top choice for foreign investors and businesses, a reputation built on a foundation of political stability, a strategic location, and a highly attractive tax system. The country's commitment to creating a business-friendly environment is particularly evident in its tax incentives, which are designed to attract international capital and skilled professionals. This guide provides a detailed look at the key tax benefits for foreign investment in Cyprus for 2025, from the low corporate tax rate to the unique IP Box Regime. For a broader overview of the local business environment, you can read our guide on The AI-Powered Marketer: Business Adviser. You can also explore our guide on Cyprus Company Formation Requirements for Foreigners.
1. The Corporate Tax Advantage: 12.5% Rate
The cornerstone of Cyprus's tax incentives for businesses is its low corporate tax rate of **12.5%**, one of the lowest in the European Union. This flat tax rate is applicable to all resident companies and is a major reason for the island's appeal as a business hub. A company is considered a tax resident of Cyprus if its management and control are exercised on the island. The tax is calculated on the company's annual profit, and the tax year is the calendar year. This low rate is a huge benefit for companies, as it allows them to retain more of their profits and reinvest them in their business. You can also explore our guide on Cyprus Corporate Tax for a deeper dive. You can find a suitable finance, banking, and investment firm in our directory.
2. The IP Box Regime: A Powerful Tool for Innovation
For companies focused on innovation and R&D, the Intellectual Property (IP) Box Regime is a game-changer. This tax incentive program is designed to encourage the registration of intellectual property on the island by offering a very low effective tax rate on profits generated from qualifying IP assets. Under the regime, a Cyprus-based company can claim an 80% exemption on the profits generated from qualifying IP assets, which results in a very low effective tax rate of just **2.5%**. This is one of the lowest in the world and is a significant benefit for companies with a high volume of IP-related income. You can read our guide on Intellectual Property (IP) Box Regime in Cyprus for a more detailed look. You can also explore our business directory for all businesses.
3. The Non-Dom Status: Tax Benefits for Individuals
Cyprus's tax incentives are not just for companies; they also apply to individuals. The **Cyprus Non-Dom Status** is a special tax regime that provides significant tax exemptions for individuals who become tax residents of Cyprus but are not domiciled in the country. The most significant benefit of this status is the full exemption from the Special Contribution for Defence (SDC) tax on passive income, such as dividends, interest, and rental income. This is a major advantage for international professionals and investors with a high income from foreign sources. You can read our guide on Cyprus Non-Dom Status for more information. For more on the local life, you can explore our guide on Cyprus for Expats.
4. Other Key Tax Exemptions and Benefits
In addition to the main tax incentives, Cyprus also offers a number of other key benefits that make it a tax-efficient jurisdiction:
- No Withholding Tax: Cyprus does not impose any withholding tax on dividends, interest, or royalties paid to non-resident companies.
- Capital Gains Exemption: Profits from the sale of securities, such as shares and bonds, are exempt from taxation in Cyprus.
- Double Taxation Treaties: Cyprus has signed double taxation treaties with over 60 countries, which prevents a company from being taxed twice on the same income.
- Loss Carry-Forward: Companies can carry forward their tax losses for up to five years, which is a great way to reduce your tax burden in the future. For more on the local business environment, you can check out our guide on Costs to Set Up a Limited Company in Cyprus.
