In early 2025, Andreas – a non-EU entrepreneur and UBO (ultimate beneficial owner) of a Cyprus holding and trading company – sat down with his tax advisers with a very specific worry.
For the last 8 years, his structure looked like this:
- Cyprus Ltd – EU holding & trading company
- UBO – Andreas, who ultimately holds the shares via an offshore holding company in a low-tax jurisdiction
- Profits were accumulated in Cyprus and then distributed as dividends with no withholding tax to the offshore level, and from there to Andreas personally.
The setup worked well:
- Competitive corporate tax in Cyprus
- No withholding tax on outbound dividends to his offshore company
- EU “clean” jurisdiction, good banking, professional service providers
But the landscape changed.
From 1 January 2026, Cyprus is:
- Applying a 15% minimum corporate tax for in-scope multinational groups (OECD global minimum tax / Pillar Two), and
- Introducing withholding tax on dividends paid to certain offshore / blacklisted jurisdictions.
Andreas realised that: if he grows and falls within the scope of the global minimum tax, his effective corporate tax burden in Cyprus will increase. Even more importantly, dividends from his Cyprus company to his offshore holding will no longer be tax-free. What used to be a very efficient flow of profits could now face tax leakage at both corporate level and at distribution level.
His advisers put another option on the table: relocating / re-domiciling the structure to Malta, or setting up a new Maltese company and gradually shifting activity there.
Cyprus vs Malta: Why 2026 Could Trigger a New Wave of Corporate Migrations
The key driver behind this shift is the changing tax landscape in Cyprus, especially from 1 January 2026, combined with already-approved global reforms such as the 15% minimum corporate tax.
What Is Changing in Cyprus?
For many years, Cyprus built its reputation as a business-friendly, low-tax EU jurisdiction with: competitive corporate tax, no withholding tax on outbound dividends in most cases, an extensive double tax treaty network and access to EU market.
Now, two major elements are reshaping the system:
- 15% Corporate Tax (Pillar Two / Global Minimum Tax)
Large multinational groups with operations in Cyprus will effectively be subject to a 15% minimum corporate tax.
This reduces the traditional advantage of Cyprus for big international structures and makes the jurisdiction less “low tax” for in-scope groups. - Withholding Tax on Dividends to “Offshores” (from 1 January 2026)
From 2026-01-01, Cyprus is introducing withholding tax on dividends paid to certain non-cooperative / offshore jurisdictions (for example, blacklisted or non-compliant jurisdictions under EU/OECD criteria).
For UBOs like Andreas, this means:
- Dividend flows from Cyprus to classic offshore companies will no longer be tax-free.
- Cyprus may still work well if the final owner is in a white-listed jurisdiction, but
- Structures using Cyprus as an EU “layer” above an offshore company become significantly less efficient.
As a result, thousands of UBOs and boards of directors are now asking:
“Should we keep our company in Cyprus or move to another jurisdiction?”
Why Malta Is Increasingly Considered an Alternative
Against this background, Malta is gaining attention as a strategic alternative, particularly from 2026 onward. Like Cyprus, Malta is an EU member state, with access to the single market and a developed professional services sector. But its tax system works differently.
Corporate Tax Rate vs Effective Tax Rate
Malta’s headline corporate tax rate is 35%, which looks high compared with Cyprus. However, Malta operates a shareholder refund system: in many structures, non-resident shareholders can receive a refund of part of the tax paid at company level, reducing the effective tax rate often to single-digit or low double-digit levels (depending on income type and exact setup).
For UBOs who are able to structure correctly through Malta and meet substance and compliance requirements, the effective tax burden can remain lower in Malta than in Cyprus, even though Malta’s headline rate looks higher on paper.
Withholding Taxes and Participation Structures
In many typical holding and trading structures:
Malta can offer:
- Attractive participation exemptions on qualifying holdings
- The refund mechanism on distributed profits
- No Maltese withholding tax on dividends to many non-resident shareholders (subject to conditions)
Cyprus, after the 2026 changes:
- Remains attractive in many cases where the shareholder is in a cooperative, white-listed jurisdiction, but
- Becomes less attractive for structures involving offshore or blacklisted jurisdictions, due to the new WHT on outbound dividends.
This is why, for UBOs like Andreas whose end location is offshore or low-tax, Malta is increasingly seen as more advantageous than Cyprus from 2026.
Summary Table: Cyprus vs Malta (Focus on 2026 and Beyond)
| Aspect | Cyprus (up to 31 Dec 2025) | Cyprus (from 1 Jan 2026) | Malta (current, general picture) |
|---|---|---|---|
| Corporate tax – headline / minimum | Standard corporate tax regime | 15% minimum corporate tax for in-scope multinational groups | 5% effective rate for foreign shareholders via refund system |
| Withholding tax on dividends to offshores | Generally no WHT on outbound dividends | WHT introduced on dividends to certain “offshore” / blacklisted jurisdictions | No general WHT to non-resident shareholders (subject to conditions) |
| Attractiveness for offshore structures | High – no WHT and low effective tax | Reduced – WHT plus 15% minimum tax for large groups | Often more attractive than Cyprus for well-structured foreign-owned groups |
| Planning flexibility | Historically flexible, especially for holdings | Less flexible due to global minimum tax and WHT changes | Still relatively flexible with refund mechanism and participation exemptions |
| Media perception (2024–2026) | Stable but under more EU/OECD scrutiny | In the spotlight: regime is tightening | Seen as a key alternative EU jurisdiction to Cyprus |
| Overall position vs Malta (post-2026) | Losing some competitive edge | Significant decline in comparative advantage | Frequently considered to have more advantages than Cyprus, especially after 2026 |
Takeaways for UBOs
If you use Cyprus with an offshore holding or low-tax final destination, the new withholding tax on dividends and potential 15% minimum tax may significantly reduce your benefit. Malta offers an EU-compliant framework, potentially lower effective tax through the refund system, no Maltese WHT on many outbound dividends to non-residents.
Are you also actively considering business relocation from Cyprus?
Book free consultation with our Team!