Cyprus: “Defensive” tax measures for payments to EU non-cooperative and low-tax jurisdictions
Include withholding tax on dividends and non-deductibility for interest and royalties
Law No. 47(I)/2025 and Law No. 48(I)/2025 (both published in the government gazette on April 16, 2025) introduce “defensive” tax measures on outbound payments of dividends, interest, and royalties to jurisdictions on the EU’s list of non-cooperative tax jurisdictions (the so-called “black list”) and low-tax jurisdictions (defined as a jurisdiction in which the corporate tax rate is less than 50% of the Cyprus corporate tax rate of 12.5%).
The defensive measures include:
- 17% withholding tax on dividends paid to companies that are tax residents of blacklisted or low-tax jurisdictions (except those listed on any recognized stock exchange)
- 17% withholding tax on interest paid by Cypriot companies to companies that are tax residents of blacklisted jurisdictions (except those listed on any recognized stock exchange), and non-deductibility of interest paid by Cypriot companies to companies that are tax residents of low-tax jurisdictions (except those listed on any recognized stock exchange)
- 10% withholding tax on royalties paid by Cypriot companies to companies that are tax residents of blacklisted jurisdictions, and non-deductibility of royalties paid by Cypriot companies to companies that are tax residents of low-tax jurisdictions
The law includes anti-abuse provisions pursuant to which arrangements with a principal purpose of avoiding the imposition of such defensive measures and without valid commercial purposes reflecting economic reality may be ignored.
The measures generally became effective on April 16, 2025, but the measures relating to low-tax jurisdictions will become effective on January 1, 2026.
Read an April 2025 report prepared by the KPMG member firm in Cyprus