Sep 22, 2025
Key withholding tax rates, deduction denials, and compliance deadlines you must know.
Cyprus Tightens Tax Rules on Low-Tax & Blacklisted Jurisdictions
Cyprus has enacted major tax law changes targeting low-tax jurisdictions (LTJs) and non-cooperative “blacklisted” jurisdictions (BLJs). These measures significantly affect holding, financing, and IP structures involving Cyprus, with new withholding taxes, deduction denials and compliance obligations.
What’s in Force Now vs. Coming Soon
Table 1: Payments to Low-Tax Jurisdictions (from 1 Jan 2026)
Character of Income | Timing Rule | Recipient | Sourcing Rule | Defensive Tax Measure |
|---|---|---|---|---|
Dividend | Receiving | Company or Permanent Establishment | From a Cyprus tax resident company (“pay” rule) | 17% WHT |
Royalties | Accruing/arising | Company or Permanent Establishment | Derived from sources within Cyprus; not paid by an individual (sourcing rule undefined) | 10% WHT (gross) |
Interest | Received or credited (regardless of payment) | Company or Permanent Establishment | From sources within Cyprus; not paid by an individual (sourcing rule undefined) | 17% WHT |
Table 2: Payments to Low-Tax Jurisdictions (in force since April 2025)
Character of Income | Timing Rule | Recipient | Sourcing Rule | Defensive Tax Measure |
|---|---|---|---|---|
Dividend | Receiving | Company or Permanent Establishment | From a Cyprus tax resident company (“pay” rule) | 17% WHT |
Royalties | Paid as consideration (regardless of payment) | Company or Permanent Establishment | From a Cyprus tax resident company (“pay” rule) | Deduction denied |
Interest | Paid (regardless of payment) | Company or Permanent Establishment | From a Cyprus tax resident company (“pay” rule) | Deduction denied |
Other Key Points
Substance Tests – Lack of genuine business activity can trigger deduction denial and WHT.
Penalties – Non-compliance can result in fines up to €10,000.
Treaty Changes – Possible renegotiation of DTTs with LTJs and BLJs.
Action Required
If your structure involves LTJs or BLJs, review it immediately to avoid:
Loss of deductions
Unexpected withholding taxes
Administrative penalties
Contact us today for a confidential review of your exposure and compliance options.
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