Tax Reform in Cyprus: What Will Change and Why It Matters for Businesses?
Cyprus has long been an attractive jurisdiction with a favorable tax system for both companies and individuals. However, the tax reform planned for 2025 could significantly change the rules of the game. For companies and high-net-worth investors residing on the island, this means one thing: timely adaptation is crucial. Why Is This Important? Tax changes […]
Cyprus has long been an attractive jurisdiction with a favorable tax system for both companies and individuals. However, the tax reform planned for 2025 could significantly change the rules of the game. For companies and high-net-worth investors residing on the island, this means one thing: timely adaptation is crucial.
Why Is This Important?
Tax changes affect not only tax rates but also business strategies, company administration costs, and compliance obligations. Misinterpreting new regulations can lead to serious financial consequences.
What Is Changing?
It is important to note that the official text of the reform has not yet been published for public discussion, so we are sharing insights from our experts.
- Corporate Tax Reform
The corporate income tax rate is expected to increase to 15% (currently 12.5%). While Cyprus remains one of the most competitive jurisdictions in the EU, this change will impact dividend planning and the calculation of provisional tax.
- Changes to Dividend Taxation
The new rules may affect companies using Cypriot holding structures. In the past, Cyprus offered a favorable tax exemption on dividends, but the upcoming reforms could alter the current regulations.
- Stricter Anti-Tax Avoidance Measures
Cyprus is actively implementing global tax standards, such as the OECD’s BEPS framework and the EU ATAD directive. This means stricter Controlled Foreign Company (CFC) rules and the introduction of economic substance requirements.
How to Prepare?
Given the scale of the reform, it is clear that a superficial understanding of the legislation will no longer suffice. Traditional structures that worked 5–10 years ago may soon become obsolete.
Experts at Main Partner Trust highlight three key steps to mitigate risks:
- Analyze the new tax environment – a business model that was effective yesterday may no longer be viable tomorrow.
- Review and assess your company’s structure with a specialist – are your existing solutions still optimal?
- Consult with experts – even minor mistakes in tax planning can lead to significant financial and reputational losses.
P.S. As soon as the official draft of the tax reform is published, we will share our insights and analysis with you. Stay tuned!
Remark: The content of this article was accurate at the time of the first publication. It provides general information on the subject matter and is not intended as legal advice. For specific advice on your situation, we recommend seeking professional counsel. If you have any questions or need further information, please contact our experts at contact@mainpartner.com. See more at Instagram, https://t.me/mainpartnertrust
