Cyprus and Blacklisted Jurisdictions

In this episode, we explore Cyprus’s new defensive tax measures targeting payments to low-tax and EU-blacklisted jurisdictions, set to take effect from 1 January 2026.

These measures mark a major compliance shift, aligning Cyprus with OECD and EU anti-tax avoidance standards while fulfilling commitments under the EU Recovery and Resilience Plan.

We’ll break down what’s changing, how these rules apply to dividends, interest, and royalties, and what global investors and corporate structures need to consider before the effective date.

🧩 Key Topics Covered

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• Background & Purpose
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• Cyprus has introduced amendments to strengthen its tax framework and discourage the use of opaque or low-tax jurisdictions. These changes were a condition of the EU Recovery and Resilience Plan, requiring the imposition of withholding taxes or equivalent defensive rules.
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• Effective Date:
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• ✅ 1 January 2026 — new measures apply to outbound payments by Cypriot companies.
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• The New Rules
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• • Dividends:
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• Outbound dividend payments by Cyprus tax-resident companies to associated entities in low-tax jurisdictions will now face a 17% withholding tax.
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• • Interest and Royalties:
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• Payments to associated entities in low-tax jurisdictions will be non-deductible for corporate tax purposes — even if incurred for generating taxable income.
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• • Existing Provisions for EU Blacklisted Jurisdictions:
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• 17% on dividends and interest
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• 10% on royalties
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• ➤ These will broaden in scope from 16 April 2025, harmonizing Cyprus’s rules with EU and OECD standards.
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• General Anti-Abuse Rule (GAAR):
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• A new GAAR targets arrangements lacking commercial substance that are primarily tax-driven.
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• If substance cannot be proven and documented for six years, the defensive measures automatically apply.
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💡 Why It Matters

These changes signal a decisive move by Cyprus to align with international anti-abuse standards while maintaining its reputation as a legitimate, compliant, and competitive tax jurisdiction.

Multinationals, holding structures, and investment funds using Cyprus in cross-border setups must review their substance, documentation, and payment flows ahead of 2026.

🧠 Key Takeaways

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• New withholding tax (17%) applies to dividends paid to low-tax jurisdictions.
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• Interest and royalties to such entities become non-deductible from 2026.
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• The GAAR introduces a substance test—six years of documentation required.
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• Aligns Cyprus with EU and OECD anti-tax avoidance frameworks.
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• Businesses should start restructuring or substantiating their cross-border...