Defensive Tax Measures for Low-Tax Jurisdictions

April 16, 2025 – Nicosia
The Cypriot government has introduced new tax measures to prevent base erosion and profit shifting to blacklisted jurisdictions.

Key Provisions:

• 17% Withholding Tax: On dividend payments to companies in non-cooperative or low-tax jurisdictions.

• Non-Deductibility: Interest and royalties paid to such jurisdictions are no longer tax-deductible in Cyprus (effective from 2026).

• General Anti-Avoidance Rule (GAAR): Transactions lacking economic substance may be disregarded for tax purposes.

These steps align with EU tax policy trends. Companies should evaluate cross-border transactions and consider restructuring to ensure compliance.