Cyprus changed its tax rules on 1 January 2026. For a UK founder who looks at a Cyprus company, the headline is simple. The corporate rate went up. The detail sits in dividends, losses and where you live.
This article covers the Cyprus side and then the UK side. It is a checklist for a conversation with your adviser, not tax advice.
The rate: 15% against the UK main rate
A Cyprus company formed in 2026 pays 15% corporate income tax on its profit. Until 2025 the rate was 12.5%. The rate applies to every Cyprus tax-resident company and permanent establishment. The Ministry of Finance links it to the OECD minimum tax initiatives.
The UK main rate of corporation tax is 25%. On paper the gap is ten points. But a rate on its own proves nothing. The question is which country taxes your profit, and that depends on where the company is managed and who earns the income. We come back to that below.
What changed for dividends
Before the reform, a Cyprus tax-resident and domiciled owner paid 17% on dividends. Now the same owner pays 5% Special Defence Contribution (SDC) on dividends from profits earned since 1 January 2026. SDC is a tax of its own, apart from income tax.
An owner who lives abroad stands outside it. So does an owner with non-dom status in Cyprus. A UK-resident owner is not Cyprus-resident, so the 5% is not the figure that matters to you. What the UK charges on a dividend you receive is a UK question. Take it to a UK adviser with the company’s expected profit in hand.
Other rules that moved on the same day
Tax losses can now be carried forward for 7 years. Until 2025 the limit was 5 years. SDC on rental income was abolished. The deemed dividend distribution rule is abolished for profits of 2026 onwards. Signed contracts and agreements carry no stamp duty from 1 January 2026, because the Stamp Duty Law was repealed.
For a young company the loss rule is the one to remember. A start-up year with a loss now keeps its value for longer.
How to set up a Cyprus company remotely
You do not need to move, and you do not need to fly out. Owners and directors can be of any nationality and need not live in Cyprus. A private company can have 1 to 50 shareholders, one director and one secretary, and no minimum share capital. The steps for how to set up a Cyprus company remotely are on one page, with the Registrar’s fees and the 8 to 12 working days it takes with a service provider.
The papers go through in a fixed order. You sign digitally. Each owner and director supplies a certified copy of a valid passport and proof of address. The Registrar issues the certificate of incorporation, and the company exists.
A local company secretary and a registered office in Cyprus come with the registration. The tax number follows: the company must apply to the Tax Department within 60 days, online through its Tax For All portal.
What a UK owner still checks at home
Cyprus is only half the picture. Four questions stay in the UK.
First, where is the company actually run? If a UK-based director takes the decisions, the UK may claim the company is resident there. Keep records of where board decisions are made.
Second, what do you pay personally when profit reaches you as a dividend? That is a UK personal tax question.
Third, does your UK reporting change? Directorships and ownership abroad may need to be declared on your own tax return.
Fourth, will your UK bank and customers accept the structure? A bank looks at the company’s substance: its office, staff or directors in Cyprus. Plan this before you promise delivery dates to clients.
A practical order
Check your UK position first. Then register the company, apply for the tax number, and open the bank account. Do the UK checks with a UK adviser who has seen the actual numbers.
The 2026 reform made Cyprus less cheap, not less useful. For the right structure it is still a clear, EU-based option.
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