Cyprus has strengthened its defensive tax regime on outbound payments to high-risk jurisdictions as part of its ongoing alignment with international tax standards and efforts to combat base erosion and profit shifting (BEPS).
Phase I, in place since 2022, introduced withholding taxes (WHT) of up to 17% on dividends, interest, and royalties paid to associated entities in jurisdictions included on the EU blacklist.
Phase II, effective from 2026, builds on this framework by extending similar measures to payments made to entities in low tax jurisdictions with corporate tax rates below 6.25%. It further enhances the regime by introducing additional WHT, non-deductibility of certain payments, and a general anti-abuse rule designed to counter tax avoidance through artificial arrangements.
These developments reinforce Cyprus’s commitment to robust tax compliance while preserving its competitiveness as a leading location for holding, intellectual property, and financing structures.
To read the full article please visit Mondaq and Lexology.
For more information, please reach out to Theodora Alexandrou
