Cyprus tightens tax measures against low-tax jurisdictions

On April 10, 2025, the Cyprus House of Representatives approved new legislation to strengthen tax measures against low-tax jurisdictions. The aim is to improve the tax system and address issues related to tax evasion.

Currently, Cyprus imposes a withholding tax on payments made by Cypriot companies to entities in jurisdictions designated by the EU as non-cooperative. These taxes apply to dividends, interest, and royalty payments, with rates of 17%, 17%, and 10%, respectively.

The new legislation introduces a 17% withholding tax on dividends paid to entities in jurisdictions with tax rates lower than 6.25%. Additionally, interest and royalty payments to these entities will no longer be deductible from corporate tax, discouraging trade with such jurisdictions.

Cyprus also plans to review agreements with jurisdictions classified as low-tax or non-cooperative to ensure the effective application of these withholding taxes. This proactive approach reflects Cyprus's commitment to aligning with international tax standards and combating tax evasion.

These measures are set to take effect on January 1, 2026.