Will Germany tax my Cyprus company's profits under the CFC rules?
Short answer
Only the passive income of a company that people in Germany control (more than half the votes, capital or profit rights) and that is taxed at less than 15%. Cyprus's corporate tax is 15% from 2026, so what matters is the tax actually charged on that income.
Passive income is defined by exclusion: income that is not on the statute's list of active activities, such as manufacturing, trade and services carried on without the German owners' involvement, and many dividends and share sales. Ordinary interest income is usually passive.
A Cyprus company is outside the rules if it carries on a substantial economic activity in Cyprus, with its own staff and premises and qualified people acting independently. Small amounts are ignored: from 2026, passive income of no more than a third of the company's income and no more than €100,000.
Germans in this position in Germany pay the German tax on the passive profits each year, whether or not they are paid out.
Sources
- Außensteuergesetz, §7 (gesetze-im-internet.de) gesetze-im-internet.de
- Außensteuergesetz, §8 (gesetze-im-internet.de) gesetze-im-internet.de
- Außensteuergesetz, §9 (gesetze-im-internet.de) gesetze-im-internet.de
Information, not advice. This answer describes the published rules as they stand on 12 October 2026, checked against the sources listed. Tax and residence rules depend on your own circumstances and change; check your position with a tax adviser qualified in Germany and in Cyprus before you act on it.
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