Cyprus Tax Structuring 2026: Using Cyprus Companies for Wealth and Tax Optimisation

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This Is Part of a Series

This publication is the first in a specialised series on Cyprus tax structuring and Cyprus tax optimisation, designed for Cypriot entrepreneurs, Cyprus tax residents, as well as international investors and groups seeking lawful, transparent and long-term wealth structuring through Cyprus companies.

The series focuses on practical Cyprus tax structures, aligned with the Cyprus tax reform effective from 1 January 2026, and explains how Cyprus companies can be used for:

• tax-efficient wealth accumulation,
• capital preservation,
• investment structuring,
• and strategic reinvestment of profits.

Each article addresses one clearly defined Cyprus tax structure, using simple diagrams and plain-English explanations, making complex Cyprus tax optimisation concepts accessible without sacrificing technical accuracy.

We begin with the most fundamental and widely applicable structure: using a Cyprus company as a treasury and wealth custodian for investing excess profits in liquid assets.

Target Audience – Clear Definitions

This publication applies to three distinct but overlapping profiles:

1. Cyprus Tax Residents (Domiciled – by origin / paternity)

Individuals who are Cyprus tax residents and considered domiciled in Cyprus, usually due to origin (father domiciled in Cyprus).

• Subject to dividend taxation (new 5% withholding tax)
• Subject to GHS (ΓεΣΥ) on dividends
• Historically exposed to Deemed Dividend Distribution (DDD) – now abolished

2. Cyprus Tax Residents – Non‑Domiciled (Non‑Dom)

Individuals who are Cyprus tax residents but not domiciled in Cyprus.

• No SDC on dividends
• Only GHS applies on dividends (2.65%, capped)
• Major beneficiaries of the post‑2026 regime

3. Non‑Tax Residents Owning a Cyprus Company

Individuals who are not Cyprus tax residents, but own Cyprus companies.

• No Cyprus tax on dividends
• No GHS
• Cyprus acts purely as a holding / treasury jurisdiction

Legislative Background – Why the 2026 Tax Reform Changes Everything

Key Structural Changes (Reform Package Effective 1.1.2026):

• Abolition of Deemed Dividend Distribution (DDD)
• Introduction of 5% withholding tax on actual dividends
• No obligation to distribute dividends at all

👉 Result: If no dividends are declared, no dividend tax is paid – indefinitely.

Legislative note: The dividend withholding tax and the abolition of DDD form part of the same reform package and are designed to operate together from 1 January 2026.

This is the cornerstone of all structures described below.

GHS (ΓεΣΥ) – Important Clarification

For categories 1 and 2 only:

• GHS applies on dividends at 2.65%
• Annual cap: €4,000 (≈ €180,000 dividend income)

In large‑scale examples, this creates a near‑zero effective tax rate.

Core Concept – Why Cyprus Tax Structuring at Company Level Now Wins

Since dividends are no longer forced, a Cyprus company can be used as a long‑term wealth accumulation vehicle.

Main Advantages of This Cyprus Tax Optimisation Structure:

1. No dividend tax unless and until you decide
2. Deferral can last forever
3. Cyprus company as a Treasury and Wealth Custodian
4. No need to transfer wealth personally (declaration simplicity)
5. Fully audited, transparent, defensible structure
6. Strong banking position & leverage
7. Multiplier effect: taxes saved are reinvested, not lost
8. Clear separation of activities (tax‑authority friendly)
9. Flexibility for partners, succession & asset protection

STRUCTURE 1 – Cyprus Tax Structure for Investing Excess Profits in Liquid Assets (Shares, ETFs, Funds)

Graphical Overview – Existing vs New Structure

Existing (Non‑Optimised) Vertical Structure

Key characteristics:

• All activities concentrated in one entity
• Mixing of operating risk and investment activity
• Reduced clarity for tax authorities and banks
• Historically exposed to forced distributions (DDD)

New Optimised Vertical Structure (Treasury & Investment Separation)

Key characteristics:

• Clear separation of activities
• CyCo A focuses purely on business operations
• CyCo B acts as a Treasury and Wealth Custodian
• 0% tax on gains from qualifying securities at CyCo B level
• Enhanced transparency, auditability and banking profile

Step 1 – Existing Situation

• CyCo A: Operating / trading Cyprus company
• Generates excess profits
• No immovable property
• Cash accumulates

Step 2 – Creation of Investment Subsidiary

• CyCo B incorporated as a 100% subsidiary of CyCo A
• CyCo B raises share capital equal to the intended investment
  • Avoids transfer pricing issues
  • No disguised loans

Step 3 – Funding

• CyCo A injects funds into CyCo B
• Fully arm’s length, fully transparent

Step 4 – Investment Activity at CyCo B

• CyCo B invests in liquid securities (shares, ETFs, funds)
• Provided activity is not trading in nature:
  • 0% tax on gains
  • 0% tax on disposals

When Does Investment Become a “Trading Activity” for Cyprus Tax Purposes? (Summary)

Under Cyprus tax practice, investments in shares and other securities are generally treated as capital investments and not as trading activities.

Reclassification to trading may arise only in exceptional cases, where there is systematic and frequent buying and selling, short holding periods aimed at quick resale, an organised dealing structure, or a clear intention to trade rather than invest.

Where securities are acquired with own funds, transactions are selective, and assets are held for dividends, long-term appreciation or portfolio diversification, the activity remains investment in nature. Cyprus practice provides a strong presumption in favour of capital treatment for such investments.

Tax Result – Why This Is Powerful

• Profits at CyCo B: 0% tax
• Dividend from CyCo B to CyCo A: 0% withholding (Cy‑to‑Cy)
• Funds available at CyCo A anytime

CyCo B acts as:

• Investment vehicle
• Treasury
• Wealth safe‑keeper

Comparison – Investing Personally vs Via Cyprus Company

Personal Investment (Risk Scenario):

• Risk of being considered trading
• Tax at personal income tax rates (up to 35%)

Corporate Investment:

• Extremely strong jurisprudence
• Securities exemption
• Audit trail
• Predictability

Even with conservative risk analysis, corporate route prevails.

Exit Strategy – Cyprus Tax-Efficient Exit Without Triggering Additional Tax

Option A – Sale of CyCo B via CyCo A

• Shareholder acquires CyCo B indirectly
• Arm’s length valuation

Practical Settlement Mechanism:

1. Shareholder owes CyCo A
2. CyCo A declares dividends
3. Dividends offset receivable same day

No transfer pricing issues. No capital gains tax.

Alternative Exit – Reorganisations (Zero Tax)

Cyprus law (EU‑harmonised) allows:

• Demergers
• Divisions
• Share exchanges

These can be executed tax‑neutral, subject to approval.

These approved reorganisation forms will be analysed and explained in detail in one of our future publications in this series.

Important Disclaimer

This publication provides general structural insight only.

Each case depends on:

• Shareholder status
• Jurisdiction
• Family situation
• Banking profile
• Risk appetite

⚠️ No structure should be implemented without a tailored analysis.

Call to Action – Cyprus Tax Structuring & Optimisation Advisory

At Rightax, we specialise in Cyprus tax structuring and Cyprus tax optimisation, using Cyprus companies as lawful, transparent and future-proof vehicles for:

• long-term wealth accumulation,
• investment structuring,
• business expansion,
• and succession planning.

Whether you are a Cyprus tax resident, a non-domiciled individual, or a non-resident using Cyprus for tax optimisation, we assess your facts, your jurisdictional exposure and your objectives before designing the appropriate structure.

📩 Contact Rightax to explore how Cyprus can be used for legitimate tax optimisation and wealth structuring, tailored to your specific profile and risk appetite.

Reach out for expert help with tax, accounting, audit, or company setup in Cyprus.

+357 99 108 510

[email protected]