Cyprus vs Spain: Tax Comparison for Founders

Running a company in Spain can mean paying tax on the same profit in several layers: corporate tax when the company earns it, savings tax when you distribute it, and, for higher net worth, an annual wealth tax and the solidarity tax on top. Cyprus taxes that profit once at 15% and, for non-domiciled residents, leaves dividends almost untouched. Here is how Spain and Cyprus compare for a founder.

Spain vs Cyprus: the headline numbers

The four layers of tax in Spain

A Spanish company pays 25% corporate tax on its profit. That is the first layer.

When the profit is distributed, the dividend is taxed as savings income on a progressive scale: 19% up to 6,000 euros, rising through 21%, 23% and 27% to 28% on the highest amounts. That is the second layer.

For founders with significant assets, two more layers can apply:

• Wealth tax, charged annually by the autonomous regions on net worth, with rates that reach around 3.5% in some regions.
• The solidarity tax on large fortunes, a state tax on net wealth above 3 million euros, at 1.7% to 3.5%, which runs alongside the regional wealth tax.

How Cyprus taxes the same profit

A Cyprus company pays 15% corporate tax. After that:

• No withholding tax applies to dividends paid to non-residents.
• A non-domiciled Cyprus tax resident pays no income tax or Special Defence Contribution on dividends.
• The only charge on the dividend is the General Healthcare System contribution at 2.65%, capped at 180,000 euros of annual income.

Cyprus has no wealth tax, no solidarity tax and no inheritance tax. There is no capital gains tax on a share sale unless the company holds immovable property in Cyprus.

What actually changes the outcome

Cyprus and Spain offer very different frameworks. The outcome depends on where you are tax resident, whether the company has genuine substance in Cyprus, and how your personal assets are held. A Cyprus company does not help a founder who stays Spanish tax resident, and Spanish CFC rules can tax a low-taxed foreign company in the owner's hands.

Moving from Spain to a Cyprus structure

A move has to be planned before it happens. Spain's exit tax can apply to unrealised gains on large shareholdings when a person ceases to be Spanish tax resident. Becoming Cyprus tax resident, ending Spanish tax residence cleanly, and building real substance in Cyprus are what make the structure hold up.

If you run a Spanish company and are weighing Cyprus, start with a review of your tax residence, your assets and the timing. Contact us to discuss your situation, or read our guide to Cyprus tax residency and non-dom status.