Netherlands vs Cyprus for your European structure

Where Cyprus leads

The 2026 reform raised the main rate and changed most of the other rules. The special defence contribution (SDC) on dividends paid by the company fell from 17% to 5%. The rules on deemed dividend distributions ended for profits earned from 2026. Those rules taxed profit that the company kept. Cyprus charges 0% withholding tax on dividends paid to shareholders abroad, except 5% on dividends to related companies in low-tax countries. This is a rule of Cypriot law, separate from any treaty. Gains on shares are exempt from personal capital gains tax. Qualifying income from intellectual property gets a deduction of eighty percent, so the effective rate is about 3% (20% of the profit, taxed at 15%). Spending on research and development gets a super-deduction of 120% through 2030.

For a founder who relocates to Cyprus, the non-domiciled regime is the most important rule. Dividends are exempt from the SDC for seventeen years. The founder then pays little personal tax on the profit of a Cypriot operating company. Most lawyers and accountants in Cyprus work in English. Cypriot company law is based on common law. Cyprus is a member state of the European Union. A Cypriot company can therefore take on EU roles and file EU VAT returns, and the EU rules on free movement apply.

What to check besides the 15% rate

The difference is smaller now. The Dutch rate is 19% on the first €200,000. On €200,000 of profit, the difference in tax is €8,000 a year. Above €200,000, the Dutch rate is 25.8%, so the difference is bigger. In 2025, the Cypriot rate was lower and the difference was bigger.

Tax residence and management. A Cypriot company that is managed from Amsterdam, Berlin or Paris is taxable where the decisions are made. From 2026, Cyprus also uses an incorporation test. A company formed under Cypriot law is resident in Cyprus, unless a tax treaty has a different rule. This is important for founders who stay in their home country while their company is in Cyprus. The company can then be resident in two countries. Plan the board, the real activity (substance) and the place of decision-making before incorporation.

Goods and location. A company in either country can take on the European roles. These are importer of record, carbon border levy declarant (CBAM), deforestation regulation operator (EUDR), product safety responsible person (GPSR) and payment licence holder. In practice, the question is where your containers and your people are. Large volumes of imported goods are shipped through Rotterdam. With an Article 23 licence, you declare the import VAT in your periodic VAT return. The Netherlands has roughly one hundred tax treaties in force, more than Cyprus. The treaties set the withholding rates that apply to your payments. See the overview of Dutch tax treaties.

How founders combine both

Two combinations are common. In the first, a founder who lives in Cyprus uses the Cypriot company for services, licensing and intellectual property. The founder adds a Dutch BV when there are European customers, imports, licences or staff. In the second, a Dutch holding owns the Cypriot company. With a shareholding of 5% or more, the participation exemption covers dividends and a later sale. The EU directives apply between the two companies. In both cases, plan the whole structure once and in writing. Include withholding tax, transfer pricing and substance. You can compare all points in the master table. For the method behind the comparison, see where to incorporate.

Frequently asked questions

Is Cyprus still a low-tax jurisdiction in 2026?

Yes. At 15%, the Cypriot corporate tax rate is still one of the lowest statutory rates in the European Union. The other Cypriot rules are often more important than the rate. Income from intellectual property can be taxed at an effective rate of about 3%. Dividends paid abroad are free of withholding tax, except 5% on dividends to related companies in low-tax countries. Gains on shares are exempt, and resident founders can use a non-domiciled regime.

What changed for Cypriot dividends in 2026?

The special defence contribution on dividends paid by the company fell from 17% to 5%. Cyprus also repealed the rules on deemed dividend distributions, for profits earned from 2026. For profit that the company keeps, the contribution now applies only when the company pays it out as a dividend. The withholding tax on dividends to related companies in low-tax countries fell from 17% to 5%. Other dividends paid to shareholders abroad are still free of withholding tax.

Does a Cypriot company work when the founder lives elsewhere in Europe?

It works if the company is managed in Cyprus. A company that is managed from another country is taxable in that country. From 2026, Cyprus also treats every company incorporated under Cypriot law as resident. A company can then be resident in two countries. The result depends on the board, the place where decisions are made and the substance in Cyprus.

Can a Dutch holding be placed above a Cypriot company?

Yes, this is a common structure. With a shareholding of 5% or more, the Dutch participation exemption covers dividends and the proceeds of a later sale. The EU directives apply to dividends from the Cypriot company to the Dutch holding. For payments from the Dutch holding to other countries, the Dutch tax treaties apply.