Since 1 January 2026, Cyprus and Gibraltar both charge a 15% headline rate of corporate tax, so the decision now rests on everything else. Cyprus is a full EU member with VAT at 19%, a broad tax treaty network and a well-known non-dom regime for individuals. Gibraltar has no VAT, English common law and close UK links, but it sits outside the EU single market for services. For EU-facing businesses Cyprus is usually the better fit; for UK-facing or locally run businesses, Gibraltar often is.
At a glance
| Gibraltar | Cyprus | |
|---|---|---|
| Headline corporate tax (Oct 2026) | 15% (20% for utilities and dominant-position abuse) | 15% from 1 January 2026 (12.5% before) |
| Tax on dividends paid to individuals | Taxed on resident shareholders, with a credit for company tax | Non-doms exempt from SDC; domiciled residents pay 5% |
| VAT | None (goods-only Transaction Tax from July 2026) | 19% standard |
| EU status | Outside the EU; customs union for goods since 15 July 2026 | EU member state, euro, single market |
| Legal system | English common law | Common law-based system with civil law influences |
| Company registration time | About three days; same day for an extra fee | Typically five to ten working days |
What changed in Cyprus’s 2026 tax reform?
Cyprus published its first major tax overhaul in more than two decades in the official gazette on 31 December 2025, with most measures in force from 1 January 2026. The key changes for companies were:
- Corporate income tax rose from 12.5% to 15%, aligning Cyprus with the OECD minimum.
- The deemed dividend distribution rule was abolished for profits earned from 2026 onwards. Profits up to 31 December 2025 remain under the old rules, so companies must track the two pools separately.
- The Special Defence Contribution (SDC) on actual dividends fell from 17% to 5% for Cyprus-domiciled shareholders.
- Tax losses can be carried forward for up to ten years instead of five, subject to conditions.
- The old Stamp Duty Law was abolished.
Cyprus’s long-standing exemptions remain: dividends received by a Cyprus company are generally exempt, and gains on the sale of shares and similar securities are exempt unless they relate to Cyprus property. Cyprus also keeps an IP box under the OECD modified nexus approach: 80% of qualifying profit is exempt, so the effective rate is about 3% at the new 15% corporate rate. The notional interest deduction on new equity continues, based on the 10-year government bond yield of the country where the funds are used plus 5%, capped at 80% of the taxable profit from that equity.
How does Gibraltar’s corporate tax compare?
Gibraltar’s standard rate has been 15% since 1 July 2024, with 20% for utilities and companies abusing a dominant position. The key difference is the basis of taxation. Gibraltar taxes income that is accrued in and derived from Gibraltar, whereas a Cyprus tax-resident company is taxed on its worldwide income, relieved by exemptions and treaties.
In practice, a Gibraltar company that genuinely earns its profits from activity outside Gibraltar may fall outside the charge, but this depends on the facts and the Income Tax Office takes a close interest in substance. Gibraltar also has no capital gains tax. Our guide to Gibraltar corporate tax explains the territorial test.
Pillar Two in both jurisdictions
Both jurisdictions have implemented the OECD global minimum tax for groups with revenue of at least €750 million:
- Gibraltar: Global Minimum Tax Act 2024, with a domestic top-up tax for fiscal years starting on or after 31 December 2023 and an income inclusion rule from 31 December 2024. No undertaxed profits rule.
- Cyprus: income inclusion rule from 31 December 2023, plus a domestic minimum top-up tax and undertaxed profits rule from 31 December 2024, closely following the EU directive.
With both headline rates now at 15%, Pillar Two is a much smaller factor in this comparison than it is against Malta or the Isle of Man.
VAT and the 2026 UK–EU treaty
Cyprus charges VAT at a standard 19%, with reduced rates of 9% and 5%, and a registration threshold of €15,600 for established businesses. Gibraltar has no VAT. Since 15 July 2026 it has had a goods-only Transaction Tax replacing import duty, at a transitional 15% standard rate; services are outside it.
The UK–EU treaty, applied provisionally since 15 July 2026, created a customs union for goods and removed routine checks at the land border with Spain. It does not give Gibraltar access to the EU single market for services or restore passporting for financial services. A Cyprus-licensed investment firm or payment institution can passport across the EU; a Gibraltar firm cannot. See the UK–EU treaty explained for business.
Residence options for founders and executives
| Gibraltar | Cyprus | |
|---|---|---|
| Main high-net-worth route | Category 2: tax on the first £118,000 of income only; maximum £42,380 (2025/26) | Non-dom status: no SDC on dividends and interest for up to 17 of 20 years |
| Executive route | HEPSS: tax on the first £160,000 of employment income | 50% exemption on employment income over €55,000 for up to 17 years |
| Short-stay residence test | None equivalent | 60-day rule, if conditions are met (Cyprus business or job, home, not resident elsewhere) |
| Investment residence | £5 million net wealth for new Category 2 applicants, announced June 2026; no start date published as of October 2026 | Permanent residence from €300,000 investment plus €50,000 annual income from abroad; no major changes reported since 2023 |
| Personal top rate | 39% under the allowances-based system (2025/26), or capped under Category 2/HEPSS | 35% above €72,000 from 2026 |
From 2026, Cypriot non-doms who become deemed domiciled after 17 years can extend their status by paying a lump sum of €250,000 for each five-year period, according to KPMG Cyprus. For someone paying themselves mainly in dividends, Cyprus non-dom status can be very efficient. For a high earner who wants a firm cap on total income tax, Gibraltar’s Category 2 residency is more predictable.
Setup, substance and banking
Companies House Gibraltar usually incorporates a company in about three days, or the same day for an extra fee. In Cyprus, name approval takes around three to five working days and full formation typically five to ten. Both require a local registered office, and Cyprus requires a company secretary. Professional fees vary by provider. As of 2026, published prices start from around £800 to form a Gibraltar company and roughly £1,000–£1,500 a year for registered office and secretary, while Cyprus providers quote about €1,500–€4,000 to form and €1,000–€1,600 a year for registered office and secretary, before accounts and audit.
Banks in both places apply strict due diligence, and substance increasingly decides the outcome: a real office, local directors who make decisions, and staff where the activity takes place. Read our guide to setting up a company in Gibraltar for the Gibraltar process step by step.
Choose Gibraltar if…
- Your customers are mainly in the UK or Gibraltar, and EU passporting is not essential.
- You sell services, especially to consumers, where having no VAT is a genuine advantage.
- Your profits arise from activity outside Gibraltar and the territorial basis can apply on the facts.
- You or a key executive will use Category 2 or HEPSS for a capped personal tax bill.
- You want English common law and a small, accessible administration close to Spain.
Choose Cyprus if…
- You need EU membership, EU directives or financial services passporting.
- Your business relies on a broad double tax treaty network: Cyprus has more than 65 treaties in force, according to 2026 adviser summaries.
- You are a founder who will draw dividends and can benefit from non-dom status or the 60-day rule.
- You want a holding company with exemptions on dividends received and on share disposals inside the EU.
- You want to invoice and bank in euros inside the eurozone.
Now that the rates match, Cyprus is usually the better choice for EU-facing groups and dividend-funded founders, while Gibraltar suits UK-facing and services businesses that value simplicity and no VAT. If low personal tax matters more than EU access, see how Gibraltar compares with Dubai, or browse other options on the comparison hub.