Cyprus Advisory Glossary

A practitioner-level reference covering the vocabulary of Cyprus tax, corporate structuring, AML compliance and financial regulation, written for advisors, executives and investors working in or through Cyprus.

Topics covered

Corporate income tax, IP Box, NID, withholding tax
Non-domicile regime, SDC, the 60-day rule
Beneficial ownership, AML, KYC, MLRO
Holding structures, DTTs, substance requirements
Fund regulation — AIF, AIFM, PIF, CySEC
International reporting — FATCA, CRS, DAC6, IFRS

AIFAlternative Investment Fund: An AIF is a collective investment undertaking that pools capital from investors and deploys it according to a defined investment policy. In Cyprus, AIFs are regulated by CySEC under the AIF Law of 2014, which brought the EU AIFMD into domestic law. They can be structured as open-ended or closed-ended vehicles and are commonly used for real estate, private equity, venture capital and multi-asset portfolios. Cyprus AIFs may be marketed to professional investors across the EU under the AIFMD passport.
AIFMAlternative Investment Fund Manager: An AIFM is a legal entity authorised to manage one or more AIFs and, where permitted, to provide portfolio management and risk management services. In Cyprus, AIFMs are licensed and supervised by CySEC under AIFMD. The framework sets requirements around capital, organisational structure, conflicts of interest, remuneration, leverage and annual reporting. A Cyprus-authorised AIFM can manage EU AIFs and market them to professional investors across Member States under the AIFMD passport, without needing a separate entity in each country.
AMLAnti-Money Laundering: AML refers to the legislative and regulatory framework designed to prevent proceeds of criminal activity from entering the legitimate financial system. In Cyprus, the primary law is the Prevention and Suppression of Money Laundering Activities Law 188(I)/2007, as amended, which gives effect to successive EU AML Directives. Banks, investment firms, auditors, legal and accounting professionals, trust and company service providers, and real estate agents are all obliged entities required to apply risk-based customer due diligence, monitor transactions on an ongoing basis, and report suspicious activity to MOKAS. See: Cost of Non-Compliance brief
Article 8 / Article 9SFDR Classification: Articles 8 and 9 of the EU Sustainable Finance Disclosure Regulation (SFDR) classify financial products by how deeply they integrate ESG factors. Article 8 funds promote environmental or social characteristics alongside their broader investment objectives. Article 9 funds go further, with sustainable investment as their core purpose, and must pass a stricter "do no significant harm" test across all positions. Both classifications bring enhanced disclosure requirements before and after the sale. Where a fund sits in this classification affects how it can be marketed, who can buy it, and the ongoing cost of staying compliant.

Beneficial Owner: A beneficial owner is the natural person who ultimately owns or controls a legal entity or arrangement, or on whose behalf a transaction is carried out. In Cyprus, the threshold is generally more than 25% of shares, voting rights or ownership interests. Where no natural person can be identified through ownership, indirect control and senior management fall-back rules apply. Beneficial ownership information must be registered in the Cyprus Registrar of Companies' UBO Registry, which is accessible to authorities, obliged entities carrying out due diligence, and the public subject to certain conditions. See: Beneficial Ownership brief
BVI vs CyprusComparative Note: The British Virgin Islands and Cyprus are both used for international holding structures, but they serve quite different purposes in today's regulatory environment. The BVI offers simple, low-cost incorporation with minimal public disclosure. Cyprus is an EU Member State with over 65 double tax treaties, a 15% corporate tax rate, and access to EU Directives that remove withholding tax between Member States. The growth of CRS, FATCA, UBO registries and the OECD's Pillar Two rules has narrowed the advantage of jurisdictions that offered anonymity without substance. Cyprus structures, when underpinned by genuine economic activity, offer better treaty access, stronger regulatory credibility and a more durable platform for international groups.

CIPACyprus Investment Promotion Agency: CIPA is the government body responsible for attracting foreign investment to Cyprus. It is the main official point of contact for international investors looking to set up in the Republic, offering guidance on available incentives, legal frameworks, licensing requirements and fast-track procedures. CIPA works alongside government ministries and regulators to make the investment process easier and represents investor interests on policy matters affecting Cyprus's business environment.
CITCorporate Income Tax: Cyprus charges corporate income tax at a flat 15% on the net taxable profits of Cyprus-resident companies and on Cyprus-source profits of non-resident companies with a permanent establishment here. The rate is one of the lowest in the EU. Key exemptions apply: dividends are fully exempt from CIT regardless of where they come from; gains from the disposal of shares, bonds and other transferable securities are also fully exempt; and income qualifying under the IP Box regime is effectively taxed at around 3%. The Notional Interest Deduction can bring the effective rate down further on equity-financed businesses.
CRSCommon Reporting Standard: The CRS is the OECD standard for automatic exchange of financial account information between tax authorities. Cyprus implements it through the EU's DAC2 Directive and exchanges data annually with over 100 jurisdictions. Banks, custodians, brokers and certain investment entities must identify the tax residency of account holders and controlling persons, collect self-certification, and report account balances, income and proceeds to the Cyprus Tax Department for onward transmission. Financial institutions that fail to comply face significant penalties.
CySECCyprus Securities and Exchange Commission: CySEC is the independent regulator for investment services firms, alternative investment fund managers, collective investment undertakings, crowdfunding platforms and crypto-asset service providers in Cyprus. Firms with a Cyprus Investment Firm licence can passport their services across EU Member States under MiFID II. CySEC also shares responsibility for AML supervision in the investment sector and has the powers to impose fines, suspend firms and revoke authorisations.
Cyprus Holding Company: A Cyprus holding company is a private limited liability company used to hold shares in operating subsidiaries, intellectual property, real estate or financial instruments. The 15% corporate tax rate, full exemption on qualifying dividends and securities gains, more than 65 double tax treaties, and the EU Parent-Subsidiary Directive make Cyprus a tax-efficient holding location. Cyprus does not apply withholding tax on dividends, interest or royalties paid out to non-residents, which makes it a practical distribution hub within international group structures. Adequate economic substance in Cyprus is required to access treaty benefits.
Cyprus Non-Dom: The Cyprus non-dom regime exempts qualifying tax-resident individuals from the Special Defence Contribution on their worldwide dividend and interest income. Foreign nationals who have not spent 17 of the past 20 years as Cyprus tax residents are automatically non-domiciled. This covers both SDC and GHS contributions on passive income from the day they establish Cyprus tax residency. Paired with Cyprus's zero income tax on dividends and capital gains on securities, a non-dom individual can receive dividend income at an effective personal rate of zero for up to 17 years. See: Non-Dom brief

DAC6Mandatory Disclosure Rules: DAC6 is the EU Directive requiring intermediaries to report potentially aggressive cross-border tax arrangements to their national tax authority, which then shares that information across EU Member States. Lawyers, accountants, tax advisors and financial institutions are all caught by the rules. In Cyprus, DAC6 was brought into law by Law 41(I)/2021. Reportable arrangements are assessed against five categories of hallmarks (A to E), covering aggressive tax planning features, transfer pricing anomalies and structures designed to sidestep automatic information exchange. Reporting deadlines are tight, and penalties for non-compliance can reach €20,000 per arrangement.
DDDDeemed Dividend Distribution: The Deemed Dividend Distribution rules require Cyprus-resident companies to distribute at least 70% of their after-tax accounting profits (with certain adjustments) within two years of the end of the relevant tax year. Where actual distributions fall short of that threshold, the balance is treated as a deemed dividend and SDC is charged at 5%. The rules only apply where the shareholder is both Cyprus tax-resident and domiciled in Cyprus. Non-domiciled individuals and non-resident shareholders are outside the scope of SDC in all cases. See: Non-Dom brief for SDC interaction
DTTDouble Tax Treaty: A double tax treaty is a bilateral agreement allocating taxing rights between two contracting states to prevent the same income from being subject to full tax in both jurisdictions. Cyprus has concluded over 65 DTTs, including treaties with the United Kingdom, Germany, France, India, China, UAE, Russia, and numerous other key trading and investment partners. Cyprus treaties typically reduce withholding tax rates on dividends, interest, and royalties below the rates in domestic law, provide for tax credit or exemption relief on foreign-source income in Cyprus, and govern the exchange of tax information between authorities. Treaty access requires that the Cyprus entity be the beneficial owner of income and, increasingly, that it demonstrate adequate substance in Cyprus.

EU Parent-Subsidiary Directive: The EU Parent-Subsidiary Directive eliminates withholding taxes on dividends paid between associated companies in different EU Member States and prevents those dividends from being taxed twice. For a Cyprus holding company receiving dividends from an EU subsidiary, source-country withholding tax is removed provided the Cyprus company holds at least 10% of the subsidiary's capital for at least 12 months. A 2015 amendment added a binding anti-avoidance clause that disqualifies arrangements put in place mainly to obtain a tax advantage rather than for genuine commercial reasons.

FATCAForeign Account Tax Compliance Act: FATCA is US legislation, enacted in 2010, requiring foreign financial institutions to identify US persons with financial accounts and report them to the Internal Revenue Service, or face a 30% withholding on US-source payments. Cyprus has signed an Intergovernmental Agreement with the US under which Cypriot financial institutions register with the IRS, carry out FATCA due diligence on their account holders, and report qualifying US accounts annually to the Cyprus Tax Department for onward transmission. Maintaining correspondent banking relationships with US banks depends on being FATCA compliant.
FATFFinancial Action Task Force: The FATF is the inter-governmental body that sets global standards for combating money laundering, terrorist financing and proliferation financing. Its 40 Recommendations are the international benchmark against which national frameworks are assessed. FATF conducts mutual evaluations of member countries, and being placed on the grey list (enhanced monitoring) or the black list brings serious consequences, including difficulty maintaining correspondent banking and heightened scrutiny from international counterparties. Cyprus is assessed through MONEYVAL, the Council of Europe's evaluation body, and is subject to EU AML legislative requirements.

HEΕταιρεία Περιορισμένης Ευθύνης — Cyprus Private Company: An HE is the standard Cyprus private company limited by shares, incorporated under the Companies Act Cap. 113. The initials "HE" followed by a registration number appear on all official documents. Minimum issued share capital is €1; there is no paid-up capital requirement. An HE may have between one and fifty shareholders, and its shares may not be offered to the public. It is the most widely used vehicle for trading, holding, intellectual property ownership, and professional services activity in Cyprus. Formation typically takes between two and five business days through a licensed corporate services provider.

ICPACInstitute of Certified Public Accountants of Cyprus: ICPAC is the professional and regulatory body for certified public accountants and registered auditors in Cyprus. It sets professional standards, runs quality assurance reviews of member firms, administers the professional qualifying examinations, and acts as the competent AML/CFT supervisory authority for its members when they provide accountancy, tax advisory or corporate services. Members providing trust and company services, accounting, audit or tax advice are subject to ICPAC's AML supervision programme and face regulatory sanctions if they fall short.
IFRSInternational Financial Reporting Standards: IFRS are the accounting standards issued by the International Accounting Standards Board and adopted by the EU for consolidated financial statements of listed companies. In Cyprus, all companies prepare statutory financial statements under IFRS or IFRS for SMEs, and these are submitted to the Tax Department as the basis for corporate income tax assessment. Standards that come up regularly in Cyprus practice include IFRS 9 (financial instruments), IFRS 15 (revenue recognition), IFRS 16 (leases), IAS 36 (impairment) and IFRS 13 (fair value measurement).
IP Box RegimeIntellectual Property Regime: The Cyprus IP Box provides an 80% deduction on qualifying profits from qualifying intangible assets held by Cyprus-resident companies, bringing the effective corporate tax rate on IP income down to around 3%. The regime complies with OECD BEPS Action 5: the share of profits that qualifies for the deduction is proportional to the R&D expenditure the Cyprus company itself incurred relative to total expenditure on the asset. Patents, software copyrights and other IP arising from R&D activity qualify, but marketing-related intangibles do not. When those profits are then paid as dividends to a non-dom shareholder, the total effective rate from creation through to distribution can be as low as 3%. See: IP Box brief

KYCKnow Your Customer: KYC is the process through which an obliged entity identifies its clients, verifies who they are, understands the purpose of the relationship and assesses the risk they represent. In Cyprus, the AML Law 188(I)/2007 imposes KYC obligations on banks, investment firms, lawyers, accountants, trust and company service providers, real estate agents and others. For higher-risk clients this extends to verifying beneficial ownership and examining source of funds and source of wealth. Due diligence must be reviewed periodically and updated whenever there are significant changes. See: Cost of Non-Compliance brief

MLROMoney Laundering Reporting Officer: The MLRO is the person within an obliged entity responsible for receiving internal suspicious activity reports from staff, assessing whether they warrant external disclosure, and submitting a Suspicious Transaction Report to MOKAS, the Cyprus Financial Intelligence Unit, where the threshold is met. The MLRO needs sufficient seniority, operational access and independence to do this properly. The personal exposure is real: failing to report a known or suspected money laundering or terrorist financing offence is a criminal offence under Cyprus law. In practice, MLROs typically sit at a senior level within the compliance or legal function. See: Cost of Non-Compliance brief

NIDNotional Interest Deduction: The NID lets Cyprus-resident companies deduct notional interest from taxable income, calculated by applying a reference rate to new equity capital introduced since 1 January 2015. The reference rate is the 10-year government bond yield of the country where the capital is deployed, plus a 3% uplift. This brings the tax treatment of equity closer to that of debt, where interest is already deductible, and lowers the effective CIT rate on equity-financed businesses. The deduction is capped at 80% of taxable income before the NID.
Non-Domicile (Non-Dom): Non-domicile status in Cyprus applies to an individual who is tax resident in Cyprus but has not been domiciled in the Republic for 17 of the past 20 years. Any foreign national who establishes Cyprus tax residency starts out automatically as non-domiciled. Non-dom individuals pay no SDC on dividend and interest income and no GHS contributions on such passive income, meaning an effective personal tax rate of zero on dividends and most passive income for up to 17 years. See: Non-Dom brief

PEPermanent Establishment: A permanent establishment is a fixed place of business, or in some treaty definitions a dependent agent, through which an enterprise carries on business in another country, giving that country the right to tax the profits it generates. The concept sits at the heart of Cyprus's treaty network, which is modelled on the OECD Convention, and determines how profits are attributed for CIT purposes. A Cyprus company with staff, management activity or a dependent agent operating in another jurisdiction can inadvertently create a taxable PE there. Equally, a non-resident company with directors based in Cyprus needs to be structured carefully, both to avoid an unintended Cyprus PE and to ensure it genuinely establishes Cyprus tax residency where that is the goal.
PIFPrivate Investment Fund: A PIF is a lightly regulated collective investment vehicle under the Cyprus AIF Law, available exclusively to a maximum of 50 sophisticated or professional investors, with a minimum initial investment of €125,000 per investor. PIFs are registered with and supervised by CySEC but operate under a simplified regulatory framework compared to a full-scope AIF. They are widely used for family office structures, co-investment platforms, private equity, and real estate investment by high-net-worth individuals and institutional investors who do not require external distribution or third-party marketing arrangements. A PIF may appoint an external AIFM or operate under a self-managed structure.

Registered Agent: A registered agent is a licensed corporate services provider authorised to act as the local point of contact and representative for a Cyprus company or for a foreign company registered in Cyprus as an overseas company. The registered agent's principal functions include accepting service of legal process, maintaining statutory company records, and facilitating communication with the Cyprus Registrar of Companies. Under the AML Law, registered agents acting as Trust and Company Service Providers (TCSPs) are obliged entities required to conduct CDD on their clients and report suspicious activity to MOKAS.
Registered Office: Every Cyprus company must maintain a registered office address in Cyprus at which official correspondence, legal notices and documents can be received. The address must be physical (not a P.O. box) and must be notified to and recorded by the Cyprus Registrar of Companies. Changes must be filed within the statutory timeframe. Registered office services are typically provided by a licensed TCSP and also help demonstrate a physical presence in Cyprus for substance and tax residency purposes.

SDCSpecial Defence Contribution: The Special Defence Contribution is a Cyprus tax on dividend income (5%), interest income (17%) and, historically, on rental income of individuals who are both tax-resident and domiciled in Cyprus. SDC on rental income for individuals was abolished from 1 January 2026 as part of recent Cyprus tax reform. Non-domiciled individuals are fully exempt. Cyprus-resident companies can also be liable to SDC on dividends received from other Cyprus-resident companies in certain circumstances. The DDD mechanism means that retained profits of Cyprus companies can attract SDC where domiciled shareholders are involved, unless sufficient distributions are made within the prescribed period. See: Non-Dom brief
Substance Requirements: Substance requirements reflect the expectation, embedded in OECD BEPS standards, EU anti-avoidance directives (ATAD I and II) and domestic legislation, that a company claiming tax residency or treaty protection must show genuine economic activity in that jurisdiction rather than a letterbox presence. In Cyprus, substance is demonstrated through board meetings held in Cyprus with a majority of Cyprus-resident directors, strategic decisions taken and recorded there, locally maintained accounting records, physical office premises and operational staff or contracted service providers. OECD Pillar Two and the EU Code of Conduct on Business Taxation have raised expectations in this area significantly in recent years.

Tax Residency (Individual): An individual is tax resident in Cyprus if they spend more than 183 days in Cyprus in the calendar year, or under the alternative 60-day rule introduced in 2017, at least 60 days, provided four further conditions are met: no other single country claims their tax residency that year; they have a business, employment or directorship connection to Cyprus; and they maintain a permanent home in Cyprus. Cyprus tax residents are liable to income tax on worldwide earnings from employment, business and rental income, subject to available exemptions. Dividends, capital gains on securities and, for non-domiciled individuals, interest income are all exempt from income tax. See: Non-Dom brief
Tax Residency (Corporate): A company is tax resident in Cyprus if it is managed and controlled in Cyprus. The test turns on where the board actually exercises strategic control: where board meetings are held, where the majority of directors are resident, and where key decisions are made and minuted. Incorporating in Cyprus is not enough on its own; the management and control test must be satisfied independently. Cyprus tax-resident companies pay CIT at 15% on their worldwide profits, subject to the exemptions described under CIT.
The 60-Day Rule: The 60-day rule is the alternative individual tax residency test available in Cyprus since 2017. To qualify in a given year, four conditions must all be met: the individual must spend at least 60 days in Cyprus; they must not be tax resident in any other single country during that year; they must have a business, employment or directorship connection to Cyprus; and they must maintain a permanent home in Cyprus, whether owned or rented. The day of arrival counts as a day in Cyprus; the day of departure does not. See: Non-Dom brief
Transfer Pricing: Transfer pricing covers the prices charged between related parties within a multinational group for goods, services, financing or intangible property. The arm's-length principle, which requires those prices to reflect what independent parties would agree, is the international standard under the OECD Guidelines. Cyprus introduced formal transfer pricing rules with effect from 1 January 2022. Groups above the prescribed thresholds must prepare a Master File and Local File and submit a Summary Information Table with their annual tax return. Penalties for non-compliance, weak documentation or audit adjustments can be significant.

UBOUltimate Beneficial Owner: The UBO is the natural person who ultimately owns or controls a legal entity, typically the individual holding, directly or indirectly, more than 25% of shares or voting rights, or who otherwise exercises control by other means. In Cyprus, obliged entities must identify and verify the UBO as a mandatory part of customer due diligence. All Cyprus-registered companies must also register their UBO information in the Registrar of Companies' UBO Registry, accessible to authorities, obliged entities and the public subject to a legitimate interest test. Keeping UBO records accurate and current matters for banking relationships, counterparty dealings and regulatory compliance. See: Beneficial Ownership brief

VATValue Added Tax — Cyprus: Cyprus VAT is governed by the Value Added Tax Law of 2000, which implements the EU VAT Directive. The standard rate is 19%; reduced rates of 9% and 5% apply to specified supplies including hospitality, certain food, pharmaceuticals, books and newspapers. Any business with annual taxable turnover above €15,600 must register. Businesses providing services cross-border into the EU need to account for VAT in the customer's jurisdiction under the B2B place-of-supply rules, which may mean registering locally or using the OSS one-stop shop. The Cyprus Tax Department handles VAT returns (filed quarterly or monthly) and VIES reporting for intra-EU supplies.

WHTWithholding Tax: Withholding tax is tax deducted at source by the payer before the net amount is remitted to the recipient. Cyprus does not apply withholding tax on dividends, interest or royalties paid to non-resident companies or individuals, regardless of whether a tax treaty is in place. This is one of the most useful features of Cyprus as a holding or IP jurisdiction. Cyprus does charge withholding tax on fees for technical services performed in Cyprus by non-resident individuals and on certain film and royalty payments, at rates set out in the relevant treaty or domestic law. The absence of outbound withholding tax is one of the main reasons international groups route income flows through Cyprus.

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