Cyprus Publishes List of Low-Tax Jurisdictions for 2026: Implications for Business

On April 9, 2026, the Cyprus Tax Authority published Circular 1/2026, which presents the current list of low-tax jurisdictions. It is important to emphasize that this list is not related to the EU "blacklist"—it is a separate tax regulatory instrument applied exclusively within the framework of Cypriot law.

Criteria for Classification as a Low-Tax Jurisdiction

According to the current regulations, a country or territory is considered low-tax if its corporate tax rate is less than 7.5%. This threshold is deliberate: it is equal to half the standard corporate tax rate in Cyprus, which will be 15% from 2026.

Therefore, any jurisdictions with a significantly more lenient tax regime automatically come under increased scrutiny from Cypriot regulators.

List of Jurisdictions

The updated list includes the following territories:

• Anguilla
• Vanuatu
• Bermuda
• British Virgin Islands
• Guernsey
• Cayman Islands
• Turks and Caicos Islands
• Isle of Man
• Bahamas
• Bahrain

Most of these jurisdictions are traditionally considered offshore or preferential financial centers, offering zero or near-zero corporate tax rates.

Tax Consequences for Cyprus Companies

The inclusion of a jurisdiction on this list has specific practical implications for businesses:

• Deduction Limitations
  Interest and royalties paid to companies in these countries may not be tax deductible. This directly increases the taxable profits of a Cyprus company.
• Dividend Taxation
  In certain cases, dividends received from such jurisdictions may be subject to a special defense contribution (SDC) at a rate of 5%.
• Increased scrutiny by tax authorities
  Any structures and transactions involving companies on the list will be subject to particularly close scrutiny. This applies to both transfer pricing and the economic justification of the transactions.

What does this mean for international business

For companies operating offshore structures, the new rules mean the need to review their current systems. Using low-tax jurisdictions no longer offers the same benefits without additional risks and potential additional tax assessments.

It is especially important to ensure real economic substance, operational transparency, and accurate documentation of all financial flows.

Conclusion

The publication of the list of low-tax jurisdictions is another step by Cyprus toward enhancing tax transparency and compliance with international standards. Businesses should consider these changes when planning their structure and cross-border operations.

If you're using or planning to implement international structures, it's important to assess the tax implications and risks in advance. Professional consulting, such as that from IT-OFFSHORE, which specializes in supporting international businesses and finding effective solutions in a changing regulatory environment, can help.