On April 2026, the Cyprus Tax Department issued a circular introducing the jurisdictions regarded as low-tax for the purposes of applying Cyprus’ defensive tax provisions.
This classification is based on internal assessment criteria, which have not been publicly disclosed. The list will be reassessed and updated on a yearly basis.
Overview of the Tax Measures
From 1 January 2026, specific defensive tax rules apply to transactions involving entities established in low-tax jurisdictions. These measures include:
- Imposition of withholding tax on dividend distributions
- Disallowance of tax deductions for certain payments, such as interest and royalties
These provisions are designed to address tax planning involving jurisdictions with significantly lower tax rates.
Low-Tax Jurisdictions for 2026
The following jurisdictions have been designated as low-tax for the 2026 tax year:
- Anguilla
- Vanuatu
- Bermuda
- British Virgin Islands
- Guernsey
- Cayman Islands
- Turks and Caicos Islands
- Isle of Man
- Bahamas
- Bahrain
- Jersey
Implications for Businesses
Companies engaging in cross-border transactions should carefully evaluate how these developments may affect their operations. In particular, it is important to:
- Review existing structures involving entities in the listed jurisdictions
- Identify any exposure to the new tax measures
- Consider whether restructuring or adjustments may be required
Being proactive in assessing these changes will help ensure compliance while minimizing potential tax risks.
How KSA Can Support You
At KSA, we provide expert tax advisory services designed to help businesses navigate complex regulatory changes with clarity and confidence. Our team supports you in assessing the impact of new developments, ensuring compliance, and identifying efficient structural solutions tailored to your needs.
Whether you are reviewing existing arrangements or considering future planning, we are here to assist you with practical, business-focused guidance.
Feel free to contact the KSA team for further assistance.
