Act III · The argumentsStory 28 of 31
The company tax bet
As Eurostat counts them, Cyprus collects more tax from companies, relative to the size of its economy, than any other country in the European Union: 6.9%. Without the defence contribution it is 5.6%, level with Malta and behind Luxembourg. Either way, a sixth of everything the state takes in depends on them.
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Ask where the Cyprus state gets its money and most people will say VAT and income tax. Few would guess that company taxes, as the statisticians define them, bring in almost twice as much as the income tax on people.
Taxes on the income or profits of companies as a share of the economy (GDP), 2024. No figure is published for Spain.
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Eurostat gov_10a_taxag (D51B) and, for Germany and Hungary, gov_10a_main, 2024. The Cyprus figure includes the special defence contribution, part of which is paid by individuals on dividends and interest; without it Cyprus collects about 5.6%.
What the numbers say
In 2024 the state collected €2.4 billion in taxes on companies. That was 6.9% of the economy. Luxembourg collected 6.5%, Malta 5.6% and Ireland 5.0%. The typical EU country collected 3.0%.
The Cyprus figure needs one caution. It adds two taxes together: in 2024, corporation tax, €1.93 billion, and the special defence contribution, €465 million. The statistics class the second as a tax on companies. The state budget lists it under individuals, because it falls on the dividends and interest of people who live here. Leave it out and Cyprus collects about 5.6%, behind Luxembourg, level with Malta and ahead of Ireland. That is still close to twice the typical country.
This has not always been so.
Taxes on the income or profits of companies in Cyprus as a share of the economy (GDP).
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Eurostat gov_10a_main, current taxes on income paid by corporations, general government, % of GDP. Includes the special defence contribution.
In 1995 company taxes were 3.7% of the economy. By 2008 they were 6.4%, and in 2025 they reached 7.1%, the highest of the whole period. In euro the rise is sharper: from €1.05 billion in 2016 to €2.58 billion in 2025. In 2025 they made up 16% of everything the state collected.
What it means for you
In 2025 company taxes came to about €2,600 for every resident, nearly twice what income tax on people brings in. Most of it, the corporation tax, is not paid through residents' own tax bills, though who finally bears a tax on profits, whether owners, workers or customers, is a question economists disagree on.
The other side of that is exposure. A sixth of the state's income rests on the profits of companies, many of them international firms that chose Cyprus and could choose elsewhere. Profits also rise and fall faster than wages or shopping, so this is the part of revenue most likely to surprise in either direction.
What people argue
Was raising the rate a risk? From January 2026 the corporation tax rate rose from 12.5% to 15%. The case that the country stays competitive is that 15% is the minimum large international groups must now pay in any case, and that it remains among the lowest rates in Europe. The budget for 2027 expects corporation tax to bring in €2.46 billion, against €2.04 billion budgeted for 2026.
The same reform cut the defence contribution on dividends from 17% to 5%. The opposition AKEL and the PEO union called the reform unfair for not taxing high incomes and wealth, and EDEK's Ilias Myrianthous, as reported by StockWatch, voiced concern about the cut on dividends. The budget has that line at €465 million in 2025, €277 million budgeted for 2026, €357 million in 2027 and €177 million in each of 2028 and 2029.
Is the state too dependent on it? One view is that this revenue is a success: an economy that attracts companies collects from them. The other is that revenue which arrived quickly can leave quickly, and that spending built on it is harder to cut than the revenue is to lose. Both are looking at the same line on the chart.
Which side convinces you?
Is the state too dependent on it?
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How we know
The comparison between countries uses Eurostat's tax statistics for 2024, the latest year with detail. Spain's figure is not published, and for Germany and Hungary we use the nearest line from the main government accounts. The two tables do not always agree: on the main accounts Malta is at 6.2%, which would put it ahead of Cyprus once the defence contribution is left out. "Typical" is the median of the 26 countries.
The split between corporation tax and the defence contribution is from the Statistical Service's detailed list of taxes. The budget figures for 2025 to 2029 are from the explanatory memorandum to the 2027 budget bill; they are on a cash basis and are not directly comparable with the Eurostat figures. The 2026 budget was drawn up before the reform was passed.
That many of the companies concerned are international is general knowledge about the Cyprus economy, not something these figures measure.