Cyprus Low-Tax Jurisdictions List 2026

Section 1 — Overview

On 9 April 2026, the Cyprus Tax Department issued Circular 1/2026, formally publishing the list of jurisdictions that are treated as low-tax jurisdictions (LTJs) for the 2026 tax year. The Circular operationalises the defensive tax measures introduced by the 2025 amending legislation and reaffirmed in the broader Cyprus tax reform 2026 package, both of which entered into effect on 1 January 2026.

The defensive measures sit alongside the existing rules targeting EU-blacklisted jurisdictions (BLJs). Together, the two regimes form a layered anti-avoidance architecture that captures payments out of Cyprus to entities sitting in jurisdictions that the EU or Cyprus itself deems to provide insufficient tax substance. Furthermore, the Cyprus Tax Department reviews the LTJ list annually and may expand or contract it as global tax conditions change — most obviously when another jurisdiction either raises its corporate tax rate above the 7.5% threshold or joins or leaves the EU non-cooperative list.

In practical terms, the publication of the 2026 Cyprus Low-Tax Jurisdictions List now removes any ambiguity about which jurisdictions the rules catch and forces affected groups to take immediate compliance and structuring action. As a result, Cyprus companies making dividend, interest, or royalty payments to associated entities in any of the named jurisdictions must reassess withholding obligations, deduction positions, and supporting documentation for the 2026 tax year — including for payments already made between 1 January and 9 April 2026.

Section 2 — The 2026 Cyprus Low-Tax Jurisdictions List

The eleven jurisdictions on the 2026 Cyprus Low-Tax Jurisdictions List are presented below, with notes on dual classification where applicable.

Section 3 — What Counts as a “Low-Tax Jurisdiction”?

Although Circular 1/2026 does not publish the precise mechanics, the underlying statute defines a low-tax jurisdiction by reference to a quantitative threshold tied to the Cyprus corporate tax rate.

Section 4 — The Defensive Measures Applied

Two distinct measures apply to payments to in-scope recipients in LTJs. Both are in effect from 1 January 2026 and now operate against the Circular 1/2026 list.

Who Is an “Associated Company”?

The defensive measures apply only where the recipient is an associated company. Generally, association exists where one entity holds or controls, directly or indirectly, at least 50% of the capital or voting rights of the other, or where both entities sit under common control by the same parent. In addition, the rules extend to permanent establishments situated in an LTJ, even where the head office itself is not in an LTJ.

Anti-Conduit Rule and GAAR

The legislation includes a general anti-abuse rule (GAAR) designed to defeat the use of interposed entities. For example, where a payment routes through a non-LTJ associated entity that lacks commercial substance — such as a recently-incorporated EU holding entity with no employees, premises, or independent decision-making — the Tax Department may disregard the structure and treat the payment as if made directly to the ultimate LTJ recipient. Furthermore, the Council of Ministers has the power to issue decrees clarifying how the GAAR operates.

Section 5 — Interaction with the EU Blacklist Regime

The LTJ regime operates in parallel with the longer-standing rules targeting EU-blacklisted jurisdictions (BLJs). Understanding how the two interact is essential for groups with multi-jurisdictional structures.

Section 6 — Treaty Renegotiation Provisions

The legislation includes a notable provision empowering Cyprus to renegotiate double tax treaties with countries that are LTJ or BLJ where the existing treaty does not grant Cyprus the taxing rights necessary to impose the defensive measures. Specifically, where such a treaty is identified, Cyprus must notify the other contracting state within three years to initiate the renegotiation process.

In practice, for most of the 2026 LTJ list, this is a non-issue — Cyprus does not have full double tax treaties with the majority of pure offshore jurisdictions (BVI, Cayman, Bermuda, Bahamas, Anguilla, Turks and Caicos). However, where a treaty does exist (notably with the Crown Dependencies — Guernsey, Jersey, Isle of Man), the legislation creates a runway to revisit the relevant treaty article if it would otherwise prevent application of the WHT.

Section 7 — Practical Implications for Cyprus Companies and Groups

For Cyprus Holding Companies with Offshore Shareholders

The first question is whether any direct or indirect shareholder is an associated company resident in an LTJ. For example, a Cyprus holding company paying a dividend up the chain to a BVI parent now faces 5% Cyprus withholding tax on that dividend — a tax that did not exist before 1 January 2026. The economic impact is meaningful: a EUR 1 million annual dividend now carries a EUR 50,000 Cyprus tax cost that previously did not exist.

For Cyprus Operating Companies with Intra-Group Financing

Where a Cyprus operating subsidiary is funded by intra-group debt from a Cayman or Bermuda finance company, the company can no longer deduct the interest expense for Cyprus corporate tax purposes — even where the interest is on commercial terms and supported by transfer pricing analysis. As a result, the interest adds back to taxable profit, increasing Cyprus corporate tax by 15% of the disallowed amount and eroding any benefit from the financing structure.

For Cyprus Companies Licensing IP from Offshore

Royalty deduction denial has the same economic effect as for interest: the disallowed royalty adds back to taxable profit, generating an additional Cyprus tax charge at 15%, even though the company has actually paid the royalty in cash. IP centralisation in BVI or similar jurisdictions, once a common feature of Cyprus structures, no longer works for groups operating substantively through Cyprus. Therefore, restructuring to bring IP onshore — taking advantage of Cyprus’s IP Box regime at an effective ~3% rate — is now an obvious response.

For Cyprus Tax-Resident Individuals (Non-Doms and Domiciled)

The defensive measures target payments from Cyprus companies to associated companies in LTJs — they do not directly tax individuals receiving dividends or other income from LTJ companies. Nevertheless, indirect impact arises where an individual owns a Cyprus company that historically extracted profits via an offshore conduit: as a result, the offshore leg now triggers Cyprus WHT, reducing distributable cash to the ultimate individual owner.

Section 8 — Documentation and Compliance Considerations

The publication of Circular 1/2026 sharpens the documentation burden across several touchpoints.

Withholding Tax Compliance

Where dividend WHT applies, the Cyprus paying company must withhold at source, remit to the Tax Department on the prescribed timeline, and report through the appropriate forms (notably the SDC declaration cycle). Failure to withhold creates a primary liability on the paying company itself — not on the recipient.

Corporate Tax Return Adjustments

For 2026 tax returns (filed in 2027), the Cyprus paying company must add back interest and royalty expenses paid to LTJ-resident associated companies to taxable profit. In addition, returns will require a clear identification of LTJ counterparties and the relevant amounts, with supporting documentation maintained in audit files.

Audit Implications

For statutory audits of Cyprus companies, the LTJ list is now a standard checklist item. Specifically, where the engagement team identifies any related-party transactions during planning, the auditor must confirm the residence status of the counterparty against Circular 1/2026 and assess whether the company has applied the appropriate tax treatment. This is particularly relevant for:

• Disclosure of contingent tax liabilities where the company has taken aggressive deduction positions
• Assessment of going-concern implications where the additional Cyprus tax burden is material
• Going-forward provisioning for current tax in the financial statements

Section 9 — Strategic Outlook

The publication of the Cyprus Low-Tax Jurisdictions List is best understood as part of Cyprus’s broader recalibration. Specifically, the 2026 reform raised corporate tax to 15% (aligned with Pillar Two), reduced SDC on dividends from 17% to 5% for resident-domiciled individuals, abolished deemed dividend distribution on post-2026 profits, introduced a flat 8% tax on crypto-asset disposals, and fully removed stamp duty.

In parallel, the Cyprus DAC8 Law brought crypto-asset reporting and HNWI ruling exchange into automatic exchange of information. The defensive LTJ measures are the necessary counterweight: a credible 15% rate combined with strong anti-avoidance defences and full transparency is what allows Cyprus to retain its EU-compliant holding-company reputation while complying with international standards.

For groups that have historically used BVI, Cayman, or Crown Dependency structures with Cyprus, the message is unambiguous. Pure offshore conduits no longer deliver the economics they once did. Going forward, value will accrue to structures with genuine substance — whether that substance sits in Cyprus itself or in another jurisdiction with a credible tax base. In short, the Cyprus Low-Tax Jurisdictions List is not a one-off compliance event; on the contrary, it is the operating reality of cross-border structuring with Cyprus from 2026 onwards.