Overview
The Cyprus Tax Department issued Circular 1/2026 on 9 April 2026, determining the jurisdictions classified as low-tax jurisdictions for the 2026 tax year. The circular is relevant for the application of Article 11(17) of the Income Tax Law and Articles 2 and 3(1)(d)(i)(aa) of the Special Contribution for Defence (SDC) Law.
Tax Implications
Interest and Royalties: Payments to in-scope recipients in low-tax jurisdictions are not deductible for income tax purposes.
Dividends: Dividend payments to in-scope recipients are subject to a withholding tax at the rate of 5%.
Low-Tax Jurisdictions for 2026
- Anguilla
- Bahamas
- Bahrain
- Bermuda
- British Virgin Islands
- Cayman Islands
- Guernsey
- Isle of Man
- Jersey
- Turks and Caicos Islands
- Vanuatu
Assessment Criteria
The Tax Department states that the determination of the applicable tax rate for assessing low-tax jurisdictions is based on specific criteria which are reviewed and adjusted on an annual basis.
EU Blacklist Considerations
EU defensive measures applicable to blacklisted jurisdictions will continue to apply to Anguilla and Vanuatu for as long as these jurisdictions remain on the EU blacklist.
Our Comments
Cyprus taxpayers engaging in transactions involving interest, royalties or dividend payments to entities in the above jurisdictions should assess the deductibility and withholding tax implications for 2026 and consider reviewing existing structures where appropriate.