Cyprus or Bulgaria After the 2026 Reform? 15% Corporate Tax and What Non-Dom Now Costs
On 1 January 2026 Cyprus raised corporate tax from 12.5% to 15% and cut the dividend charge on resident shareholders from 17% to 5%. One of those moves is quoted everywhere and the other is not, which is why most comparisons written this year point in the wrong direction.
A question we get weekly
“Cyprus non-dom means 0% on dividends. Isn’t that better than Bulgaria?”
It is the most common opening line we receive about Cyprus, and the premise is correct. A Cyprus tax resident who is not domiciled there pays no Special Defence Contribution on dividends at all. Zero, on any amount, for seventeen years.
That is not enough. Owner cost is built from three layers: what the company pays on its profit, what the owner pays to take it out, and what health or social contributions attach to the distribution. Non-dom removes the middle layer and leaves the other two standing.
On €100,000 of profit distributed in full, a Bulgarian EOOD costs €14,500 in total, from 10% corporate tax and 5% dividend tax. A Cyprus company owned by a non-dom costs €17,252.50: 15% corporate tax, no dividend charge, and a 2.65% health contribution on the distribution. A Cyprus company owned by a resident with Cypriot domicile costs €21,502.50. Non-dom closes most of the gap. It does not close it, because the reform that gave non-doms nothing also raised the rate underneath them by 2.5 percentage points.
The rest of this page shows the arithmetic, what the January reform actually changed in both directions, and the one scenario where Cyprus is not close but clearly ahead.
What non-dom actually gives you
The exemption is real, and narrower than it reads
Cyprus levies two separate charges on investment income received by individuals. The first is the Special Defence Contribution, and since 16 July 2015 it applies only to people who are both Cyprus tax resident and Cyprus domiciled. Somebody who moves to Cyprus from Germany, Serbia or the United Kingdom is resident but not domiciled, and the SDC does not reach them.
The second charge is the General Healthcare System contribution, known locally as GESY, and it does not care about domicile. It applies at 2.65% to dividends, interest and rent received by any Cyprus tax resident.
GESY carries a ceiling that matters more than the rate does. Contributions are calculated on annual income up to €180,000. That caps the charge on passive income at €4,770 a year, no matter how much is distributed. A founder taking €200,000 in dividends pays exactly the same GESY as one taking €5 million. Past that point the marginal cost of taking money out of a Cyprus company is nil for a non-dom, which is a genuinely unusual feature in the European Union. It is also the part that the phrase “0% on dividends” quietly leaves out, because the phrase describes the SDC and not the health contribution sitting beside it. Bulgaria has no health charge on dividends at all, so the two systems converge at low distributions and diverge in Cyprus’s favour only on this one line.
The ceiling is the argument. The rate is not.
Who qualifies, and for how long
Non-dom status is not applied for and not granted. It follows from where your domicile of origin sits and from a counting rule: an individual becomes deemed domiciled in Cyprus once they have been Cyprus tax resident for at least 17 of the 20 tax years preceding the year being assessed. Until that point the SDC exemption holds automatically.
Seventeen years is a long horizon, and for most founders asking the question it is longer than the plan they are actually making. It is also, precisely, the end of something.
The exemption covers investment income, not employment
Non-dom removes SDC from dividends and interest. It does nothing to personal income tax on salary, which runs on the ordinary Cyprus bands: 0% to €22,000, then 20%, 25%, 30% and 35% above €72,000. A founder who pays themselves a salary rather than dividends gets no benefit from non-dom status on that income at all.
The price of qualifying
Year eighteen now has a published price
Until this year, deemed domicile simply arrived. Once you had been resident for 17 of the previous 20 years the SDC switched on, and the standard planning answer was to leave Cyprus, break residence for the required period and return.
The 2026 reform introduced an alternative. Article 3D of the SDC Law lets an eligible individual extinguish their entire SDC liability on dividend and interest income by paying a lump sum, and the Cyprus Tax Department published guidance on how it works in Circular 2/2026 on 29 May 2026.
The terms are unusually blunt for a tax measure.
| The alternative method of taxation | Terms |
|---|---|
| Lump sum | €250,000, paid upfront, per five-year period |
| Periods available | Two, of five years each — ten years in total |
| Annual equivalent | €50,000 a year |
| What it covers | SDC on dividend and interest income, Cyprus and foreign, irrespective of the amount earned |
| Who may elect | Individuals with a domicile of origin outside Cyprus who became deemed domiciled |
| Deadline for the 2024–2026 cohort | 30 June 2026 |
| If circumstances change | The election is irrevocable, and the Tax Department will not refund the payment under any circumstances |
Read that as a valuation rather than as a penalty. The Cyprus legislature has effectively put a number on what long-term non-dom status is worth to the people who hold it, and the number is €50,000 a year. For an owner distributing €300,000 annually, paying the lump sum beats the alternative comfortably. For an owner distributing €120,000, it does not come close, and the honest answer at year seventeen is to move or to accept the SDC.
Bulgaria has no equivalent, because Bulgaria has nothing to extend. The 10% and 5% apply in year one and in year thirty, to a resident and to a non-resident, without a status to qualify for and without a clock running against you.
Working it through
What €100,000 of profit costs in each place
One owner, one company, profit distributed in full, no salary drawn and no treaty relief applied. The Cyprus column splits in two because domicile changes the answer by more than four thousand euro.
| On €100,000 of profit | Bulgaria (EOOD) | Cyprus, non-dom owner | Cyprus, domiciled owner |
|---|---|---|---|
| Company-level tax | €10,000 at 10% | €15,000 at 15% | €15,000 at 15% |
| Available to distribute | €90,000 | €85,000 | €85,000 |
| Tax on taking it out | €4,500 at 5% | none | €4,250 at 5% SDC |
| Health contribution | none on dividends | €2,252.50 at 2.65% | €2,252.50 at 2.65% |
| Total to the state | €14,500 | €17,252.50 | €21,502.50 |
| Effective rate | 14.5% | 17.25% | 21.5% |
| Owner keeps | €85,500 | €82,747.50 | €78,497.50 |
Bulgarian figures assume distribution in full to one individual and no salary. Cyprus figures assume the owner is Cyprus tax resident, that the dividend is paid from profits of tax year 2026 or later, and that annual income stays below the €180,000 GESY ceiling.
How much the reform moved
The comparison worth making is not Bulgaria against Cyprus today. It is Cyprus against itself, twelve months apart.
Under the rules that applied until 31 December 2025, the same €100,000 in a Cyprus company owned by a non-dom cost €12,500 in corporate tax and €2,318.75 in GESY, for €14,818.75. Bulgaria cost €14,500 then as it does now. The difference was €318.75 on a hundred thousand euro of profit, which is close enough that anyone would reasonably have decided on banking, language or where they wanted to live instead.
From 1 January 2026 the same comparison is €2,752.50. The gap did not appear. It widened, by a factor of roughly eight and a half, and it did so because of a rate change that most published comparisons have not yet absorbed.
What happens at larger profits
The GESY ceiling starts to bind once the distribution passes €180,000, which happens at about €211,765 of profit. Above that point the Cyprus non-dom cost becomes 15% of profit plus a fixed €4,770, while Bulgaria stays at a flat 14.5%. The two lines never cross. At €500,000 of profit the figures are €79,770 against €72,500; at €1,000,000 they are €154,770 against €145,000. A 5 percentage point difference in corporate tax is not recoverable through a dividend charge that was only 5% to begin with.
Every layer, both sides
The two systems side by side
| Item | Bulgaria (EOOD / OOD) | Cyprus (Ltd) |
|---|---|---|
| Corporate income tax | 10% flat | 15% from 1 January 2026, previously 12.5% |
| Dividend charge, resident owner | 5% | 5% SDC on 2026 profits, 0% for a non-dom |
| Dividend charge, pre-2026 profits | 5% | 17% SDC, subject to transitional rules |
| Health contribution on dividends | None | 2.65%, capped at €180,000 of income |
| Interest from an EU or EEA bank | Tax free since 1 April 2022 | 17% SDC, or 2.65% GESY only for a non-dom |
| Personal income tax | 10% flat from the first euro | 0% to €22,000, then 20% / 25% / 30% / 35% |
| Employee and employer social | 10.58% employee, 14.12%–14.82% employer | 8.8% each |
| Contribution ceiling | €2,300 a month, or €27,600 a year, since 1 August 2026 | €68,904 a year |
| Standard VAT | 20% | 19% |
| VAT registration threshold | €51,130 | €15,600 |
| IP regime | None | 80% notional deduction, about 3% effective |
| EU status | Member, eurozone since 2026 | Member, eurozone since 2008 |
Two rows in that table decide most real cases. The VAT threshold is one: at €15,600 a Cyprus company registers for VAT almost as soon as it starts trading, while a Bulgarian company can reach €51,130 of domestic turnover first. The IP row is the other, and it goes the other way entirely.
The contribution ceiling is worth a second look, because the two countries trade places on it. Bulgaria charges the higher rate but stops collecting at €27,600 of annual insurable income; Cyprus charges 8.8% from each side and keeps collecting to €68,904. A founder on a modest salary pays more in Bulgaria. A founder paying themselves €70,000 pays contributions on €27,600 in Bulgaria and on €68,904 in Cyprus, which reverses the comparison well before the rates matter. The Bulgarian ceiling was raised from €2,111.64 to €2,300 a month on 1 August 2026, so figures published earlier in the year understate it.
Fifteen against ten
What the January reform changed, in both directions
The Cyprus House of Representatives approved the package on 22 December, and it took effect on 1 January 2026. Coverage of it has been lopsided: the rate rise travelled and the reliefs did not, so a reader who only saw the headline came away with half the picture.
Moves against the owner
- Corporate income tax rises from 12.5% to 15%, for all companies, aligning with the OECD minimum
- Profits of foreign permanent establishments in EU non-cooperative jurisdictions lose their exemption
Moves in the owner’s favour
- SDC on dividends paid to Cyprus resident and domiciled individuals falls from 17% to 5%, on profits of tax year 2026 onwards
- The deemed dividend distribution rules are abolished for profits earned from 1 January 2026, so undistributed profit is no longer taxed as if it had been paid out
- Stamp duty is abolished from 1 January 2026
- The 120% super-deduction on qualifying research and development spending runs through 2030
- Gains from cryptoasset transactions are taxed at a flat 8%
Taken together, the reform is far better news for a Cyprus resident who was already paying 17% SDC than for a non-dom, who gained nothing from the dividend cut and absorbed the full 2.5 point rise underneath it. The abolition of deemed distribution is the genuinely significant piece for anyone holding profit inside a Cyprus company, and it brings Cyprus closer to how Bulgaria has always worked: profit that stays in the company is not taxed a second time for staying there.
A reform can raise your rate and lower your bill at the same time, and this one does exactly that for some owners and the opposite for others.
One caution about older material. A large share of the Cyprus content ranking today still quotes 12.5% and 17%, both of which stopped being correct in January. If a comparison you are reading does not mention the deemed distribution repeal, it was not written this year.
The slower half
The part that is not in any rate table
Both countries are EU members with euro banking, VIES-registered VAT numbers and commercial registers a compliance officer can search. On paper the banking question is a tie.
In practice, a pattern shows up often enough in expat and personal-finance forum threads to be worth naming without pretending it is our own casework. A founder incorporates in Cyprus and is told the account will take a few weeks. Two months later they are still answering questions about source of wealth, expected counterparties and projected turnover. An in-person or video meeting with the directors is required before the account is activated. Cyprus banks carry the memory of the 2013 deposit levy and the correspondent-banking pressure that followed it, and they price non-resident beneficial owners into their risk models accordingly. None of that makes Cyprus a bad jurisdiction, and the same file would be built for the same owner in several other member states. It makes the banking timeline longer than the incorporation timeline, which is the thing founders consistently underestimate when they compare the two countries on rates alone.
Bulgarian banks apply the same anti-money-laundering framework, because it is the same European framework. What differs is the intensity of the file they build around a non-resident owner, and the practical route available to open the account without being in the country.
What we can and cannot help with
We arrange corporate bank accounts in Bulgaria, including remotely through a notarised power of attorney, and we have done so with ОББ and UniCredit. We do not open accounts in Cyprus, and we do not promise any bank’s decision anywhere, in either country. Government fees, translations and notary costs are billed separately.
Budget the account, not just the company. In both countries it is the slower half.
Where Cyprus comes out ahead
Three situations where the answer is Cyprus
The tables above are unkind to Cyprus on ordinary trading profit, and that is an accurate reading of ordinary trading profit. It is not the whole business.
Your revenue is qualifying IP
The Cyprus IP Box allows a notional deduction of 80% of qualifying profits from qualifying intellectual property, which leaves an effective rate of about 3% under the 15% headline. On €100,000 of qualifying IP profit distributed to a non-dom, the total cost is about €5,570 against €14,500 in Bulgaria. Bulgaria has no IP regime and no answer to this.
You pay yourself a modest salary
Cyprus taxes the first €22,000 of employment income at 0%. Bulgaria charges 10% from the first euro. A founder drawing €22,000 as salary pays €0 in Cyprus income tax and €2,200 in Bulgaria, before contributions in either place.
You fund the company with equity
The notional interest deduction lets a company deduct a notional return on new equity contributed after 2014, capped at 80% of the taxable profit from the financed activity. For a capital-heavy business this can bring the effective corporate rate well below 15%. Bulgaria offers nothing comparable.
The IP case deserves the qualification that goes with it, because the regime is narrower than the headline. Qualifying IP means patents, copyrighted software, utility models and certified novel intellectual property. Trademarks and marketing-related assets are excluded. The benefit is also restricted by a modified nexus fraction tied to your own research and development spending, so intellectual property that was acquired rather than developed does not attract the full deduction. A software business writing its own code fits the regime almost perfectly. A business whose main asset is a brand does not fit it at all.
Against those three, the Bulgarian case is narrower than it is usually sold. Bulgaria is not the lowest rate in Europe — Hungary’s headline is 9%, Estonia charges nothing on retained profit, and Malta reaches roughly 5% through shareholder refunds. What Bulgaria offers is a flat 10% and a 5% dividend tax that behave identically every year, with no status to maintain, no ceiling to watch, no seventeen-year clock and no lump sum at the end of it.
What people write in to ask
Frequently Asked Questions
Is Cyprus corporate tax 12.5% or 15%?
15%, from 1 January 2026. The 12.5% rate applied up to 31 December 2025 and is still quoted in a large amount of material published this year. The increase applies to all companies, not only to large groups within scope of the global minimum tax.
Do non-doms in Cyprus really pay 0% tax on dividends?
They pay no Special Defence Contribution, which is the 5% charge, and no personal income tax on dividends. They do pay the General Healthcare System contribution of 2.65%, capped at €180,000 of annual income, so the maximum is €4,770 a year regardless of the amount distributed.
Which is cheaper on €100,000 of profit, Bulgaria or Cyprus?
Bulgaria, in both Cyprus scenarios. The Bulgarian total is €14,500 against €17,252.50 for a Cyprus non-dom and €21,502.50 for a Cyprus resident with Cypriot domicile. The gap widens as profit rises, because the Bulgarian rate is flat and the Cyprus corporate rate is 5 points higher.
How long does Cyprus non-dom status last?
Seventeen years. An individual becomes deemed domiciled once they have been Cyprus tax resident for 17 of the 20 preceding tax years, at which point the SDC exemption ends. From 2026 it can be extended by paying €250,000 for each of two further five-year periods.
What is the €250,000 payment in the Cyprus 2026 reform?
An alternative method of taxation under Article 3D of the SDC Law. Paying it upfront extinguishes SDC on dividend and interest income, Cyprus and foreign, for five years, and it can be elected twice. The election is irrevocable and the Tax Department does not refund it. Cyprus Tax Department Circular 2/2026, issued 29 May 2026, sets out the procedure.
Is Cyprus better than Bulgaria for a software company?
Often yes, because of the IP Box. An 80% notional deduction on qualifying profits from copyrighted software brings the effective corporate rate to about 3% against Bulgaria’s 10%. The benefit depends on the modified nexus fraction, so it rewards a company that develops its own code rather than one that licenses code developed elsewhere.
Did Cyprus abolish the deemed dividend distribution rules?
Yes, for profits earned from 1 January 2026 onwards. Under the previous rules, undistributed profits could be treated as distributed after two years and charged to SDC. Removing that brings Cyprus closer to Bulgaria, where retained profit carries no second charge for being retained.
Can I move an existing Cyprus company to Bulgaria?
You can incorporate in Bulgaria and migrate the activity, contracts and staff, which is the route most founders take. It is a commercial and employment exercise rather than a filing, and the timing matters for VAT, existing client agreements and any Cyprus exit consequences on assets held by the company.
Choosing between them
Which one should you choose?
Choose Cyprus when the income is qualifying intellectual property, when you intend to live there and draw a salary within the lower bands, or when the company is equity-funded enough for the notional interest deduction to bite. In the IP case it is not a close decision, and no amount of flat-rate simplicity in Bulgaria offsets an effective 3%.
Choose Bulgaria when the company sells ordinary services or goods and the profit is meant to reach you. On €100,000 that is €14,500 against €17,252.50, and the difference grows with every additional euro of profit. There is also nothing to qualify for, nothing to lose after seventeen years, and no €250,000 decision waiting at the end of it.
Both answers assume the company is genuinely managed where it is registered. Neither country sells an exemption from that, and the tax authority of the country you actually live in is the one that decides whether you have it.
Cyprus rewards what your company owns. Bulgaria rewards what it earns.
Run it on your own figures
Send the annual profit, how much of it you need to draw, whether any of your revenue is licensed intellectual property, and where you actually spend the year. We will run both systems on those numbers and say plainly which is cheaper, including when the answer is Cyprus.
Related comparisons
- Bulgaria vs Romania — the micro-company regime after the 2026 threshold cut
- Bulgaria vs Estonia — 0% on retained profit against a flat 10%
- Bulgaria vs the UAE — 9% outside the EU, and what the substance test costs
- Lowest tax countries in Europe — eleven jurisdictions ranked, every rate dated
- All Bulgaria vs Europe comparisons
How this was checked
Sources and basis of calculation
Every Cyprus and Bulgarian rate on this page was checked against PwC Worldwide Tax Summaries or a Big-Four alert on 19 August 2026. No rate here is taken from a secondary summary or a competitor’s guide.
- PwC Worldwide Tax Summaries — Cyprus, corporate income tax (15% from 1 January 2026, 12.5% up to 31 December 2025)
- PwC — Cyprus, taxes on personal income (income tax bands; SDC 5% on dividends from 2026 profits, 17% on earlier profits; 17% on interest)
- PwC — Cyprus, income determination (SDC applies only where the individual is both Cyprus tax resident and Cyprus domiciled, since 16 July 2015)
- PwC — Cyprus, other taxes (GESY 2.65% on dividends, interest and rent; €180,000 annual cap; social insurance 8.8% each; insurable earnings ceiling €68,904)
- PwC — Cyprus, tax credits and incentives (IP Box notional deduction of 80% of qualifying profits; notional interest deduction capped at 80% of taxable profit)
- PwC — Cyprus, other taxes (VAT 19%, registration threshold €15,600, stamp duty abolished from 1 January 2026)
- KPMG Cyprus — Circular 2/2026, extension of the non-dom regime (€250,000 per five-year period, two periods, irrevocable, no refund, 30 June 2026 deadline)
- KPMG — Cyprus tax reform enacted, effective 1 January 2026 (rate increase, R&D super-deduction to 2030, 8% on cryptoasset gains)
- PwC — Bulgaria, corporate income tax (10%)
- PwC — Bulgaria, withholding taxes (5% on dividends)
- PwC — Bulgaria, other taxes (VAT 20%; registration threshold €51,130 from 1 January 2026; social contributions 10.58% employee and 14.12%–14.82% employer)
- PwC — Bulgaria, income determination (interest from EU and EEA bank accounts tax free since 1 April 2022)
- National Revenue Agency of Bulgaria — insurable income and National Social Security Institute — the change from 1 August 2026 (maximum monthly insurable income €2,111.64 to 31 July 2026 and €2,300 from 1 August 2026, under the State Social Security Budget Act for 2026, State Gazette No. 68 of 28 July 2026)
Basis of calculation. All figures assume a single individual owner, profit distributed in full in the year it is earned, no salary drawn, no double tax treaty relief applied and no group structure. Cyprus dividends are assumed to be paid from profits of tax year 2026 or later, so the 5% SDC rate applies rather than the transitional 17%. Effective rates are rounded to one decimal place. These are worked examples for comparison, not tax advice for a specific business — the answer depends on where you live, where the company is managed and what it actually does.
Last updated: August 2026.
Daniel Malbašić is a business expert with extensive experience in the field of business consulting, organization and business optimization. His expertise includes market analysis, strategic planning, and implementation of effective business solutions. Daniel is dedicated to helping companies grow and improve their operations, providing them with comprehensive support in making key business decisions.