Estonian Company Run from Cyprus: Tax Rules

Many entrepreneurs who live in Cyprus — Cypriots and people who moved there — form or buy an Estonian private limited company (OÜ), often as e-residents, and run it from Cyprus. That works, but Cypriot income tax does not look only at where a company was founded: a company whose control and management is exercised in Cyprus is resident in Cyprus. Cyprus has a rule on controlled foreign companies, written for Cypriot resident companies. And the Estonia–Cyprus tax treaty leaves a company resident in both countries to an agreement between the two tax authorities, with regard to its place of effective management. This guide sets out these rules with the official texts, and what we do on the Estonian side.

The guide is general information, not tax advice. How your company and you are taxed depends on the facts of your case; ask a Cypriot tax adviser before you form or buy the company. We read the Income Tax Law (Ο περί Φορολογίας του Εισοδήματος Νόμος, N.118(I)/2002) in the consolidated text of the Cyprus Tax Department up to Law N.219(I)/2025, together with the amending laws N.244(I)/2025 (the tax reform, in force from 1 January 2026), its correction, N.17(I)/2026, N.66(I)/2026 and N.67(I)/2026, and the Estonia–Cyprus tax treaty in Riigi Teataja, on 24 October 2026; the English wording of the Cypriot law below is our translation.

In Estonia: an Estonian company is Estonian

A company established under Estonian law is resident in Estonia for tax purposes (Income Tax Act § 6). Its profit is taxed when it is distributed, not while it stays in the company — the guide how Estonia taxes company profit explains the rule. The company keeps its Estonian duties wherever its owners live: accounts, an annual report to the commercial register and, if its address is abroad, a contact person in Estonia.

In Cyprus: the company side

Control and management in Cyprus. Since the reform, a resident of the Republic, for a company, means a company whose control and management is exercised in the Republic, or a company incorporated in the Republic under the Companies Law unless a tax treaty provides otherwise (Income Tax Law, section 2, as replaced by Law N.244(I)/2025).
Rate. The corporate income tax rate is 15% from 1 January 2026; the reform replaced the earlier 12.5% (Income Tax Law, Second Schedule, paragraph 2, as amended by Law N.244(I)/2025).

An Estonian OÜ is incorporated in Estonia. If you live in Cyprus and the company is in fact controlled and managed from there, Cyprus can treat it as a Cypriot resident company. Your Cypriot tax adviser answers that with the facts of your case.

In Cyprus: the owner side

Controlled foreign company. A company that is not resident in Cyprus is a controlled foreign company when a Cypriot resident company, alone or with its associated enterprises, holds directly or indirectly more than 50% of its voting rights or capital or is entitled to more than 50% of its profits, and the corporate tax the company actually paid is lower than 50% of the tax it would pay in Cyprus (Income Tax Law, section 36A(1)).
What is added. The undistributed income of the controlled foreign company that arises from non-genuine arrangements put in place for the essential purpose of obtaining a tax advantage is added to the taxable income of the Cypriot resident company (section 36A(2)).
Who is a resident individual. An individual who stays in Cyprus for periods exceeding 183 days in the tax year is resident; an individual who stays in no other state for more than 183 days can be resident after 60 days in Cyprus when the further conditions of the law are met (section 2).

The controlled foreign company rule is written for Cypriot resident companies. How an individual owner living in Cyprus is taxed on what the Estonian company pays out is a question for your Cypriot tax adviser.

What the Estonia–Cyprus tax treaty says

Resident in both countries. If a person other than an individual is resident in both states, the competent authorities settle the question by mutual agreement, with due regard to its place of effective management or any other relevant criterion (convention signed in Luxembourg on 15 October 2012, article 4(3); RT II, 04.10.2013, 2). The treaty does not decide it by itself.
Permanent establishment. A permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on; it includes especially a place of management, a branch and an office (article 5(1) and (2)). The profit attributable to it may be taxed in the state where it is (article 7(1)).
Directors' fees. Fees a Cypriot resident receives as a member of the board of directors or a similar organ of an Estonian company may be taxed in Estonia (article 15) — see board member fee or dividend from abroad.
Dividends. Dividends paid by an Estonian company to a Cypriot resident are taxable only in Cyprus (article 10(1)).

So the treaty does not settle a double residence by itself: a company controlled and managed from Cyprus may need an agreement between the two tax administrations. The multilateral convention on tax treaty measures (MLI) can change the rules of tax treaties; how it applies to your company is a question for your Cypriot tax adviser — we do not give that ruling.

What to decide before you form or buy the company

Where the company is controlled and managed. That is the fact the Cypriot residence rule and the treaty look at.
Who holds it. A Cypriot company holding more than 50% brings in the controlled foreign company rule.
How profits reach you. Dividends and board fees are covered by articles 10 and 15 of the treaty.

What we do on the Estonian side

for your own company, a written analysis of its tax residence and permanent establishment under these rules — an analysis, not tax advice;
online formation for an e-resident — €950 Registered address and contact person service for one year are included., or formation by power of attorney — €1,250;
a ready-made company bought remotely — €1,200 Registered address and contact person service for one year are included.;
accounting — from €150 / month and the annual report — from €450;
the registered address and contact person after the first 12 months — €350 / year.

Our accounting covers the Estonian company's Estonian obligations. Cypriot tax returns and Cypriot tax advice are not included. Owners in other countries: Estonian company run from abroad compares the rules side by side.

Prices exclude VAT. All communication takes place by email.

Ready to start? A new Estonian company — online for e-residents or by power of attorney; Cypriot tax advice is not included. Order.

Official sources

The laws this article names, by the name of their official text, as read on 9 October 2026. For the Estonian acts we read the English translation in Riigi Teataja; the legally binding text is the Estonian one.

Income Tax Act — Riigi Teataja, English translation

Sources are named in the text, without links. To see which of our services your company needs, open the Business Navigator.

Frequently asked questions

Is my Estonian company taxed in Cyprus if I run it from Cyprus?

It can be. Since the 2026 reform a company whose control and management is exercised in Cyprus is resident in Cyprus (Income Tax Law, section 2, as replaced by Law N.244(I)/2025), and the corporate rate is 15% from 2026 (Second Schedule). In Estonia the company stays resident because it was established under Estonian law (Income Tax Act § 6). Under the Estonia–Cyprus tax treaty the competent authorities settle such a double residence by mutual agreement, with regard to the place of effective management (article 4(3)). The Cypriot controlled foreign company rule is written for Cypriot resident companies (section 36A). Ask a Cypriot tax adviser before you form or buy the company; we handle the Estonian side.

Estonian company run from Cyprus: what is taxed where