Cyprus Tax Advantage

Cyprus presents a highly attractive tax environment for individuals looking to buy property and relocate. Its classification as a low-tax jurisdiction, along with its compliance with EU and OECD standards, makes it an appealing choice.

These tax advantages, combined with Cyprus’s strategic location and legal system based on UK common law, make it an ideal destination for international business and property investment.

• check_circleTaxation is based on residency status (management and control test or incorporation test*)
• check_circle12,5% corporate tax on trading profits
• check_circle100% exemption
• check_circleNotional Interest Deduction (NID) available for new capital introduced
• check_circleNo withholding tax on outgoing payments (dividends-interest-royalties**)
• check_circleDividend income is exempt from taxation (subject to relaxed conditions)
• check_circleApplicability of all EU tax directives
• check_circleForeign exchange differences are tax neutral
• check_circleGroup relief availability (for 75% holdings)
• check_circleTax exempt re-organisations
• check_circleAdvanced tax ruling practice offers safety and predictability for investments
• check_circleAttractive and constantly expanding Double Tax Treaty network

*The incorporation test only applies if Cyprus incorporated companies are not tax resident in any jurisdiction.

**Except on certain payments to companies in jurisdictions that are blacklisted by the EU.

• play_arrowProgressive Tax System: Income up to €19,500 is tax-free, with rates progressively increasing to a maximum of 35% for income over €60,000.
• play_arrowExemptions on Dividends and Interest: Dividends and interest are generally exempt from personal income tax.
• play_arrowSpecial Contribution for Defense (SCDF): This applies to dividends (17%), interest (30%), and rental income (3%), with varying rates based on residency status and type of income.
• play_arrowNon-Domiciled Individuals: Such individuals are exempt from SCDF on dividends and interest, making Cyprus particularly attractive for expatriates.
• play_arrowForeign Pension Income: This is taxed at a flat rate of 5% on amounts exceeding €3,420, with an option to be taxed at normal progressive rates.

• play_arrowNo Immovable Property Tax: As of January 1, 2017, the annual immovable property tax has been abolished, reducing the overall tax burden on property owners.
• play_arrowReduced Transfer Fees: The Department of Land and Surveys charges transfer fees based on the market value of the property. These fees are reduced by 50% if the purchase is not subject to VAT, providing significant savings.
• play_arrowVAT on New Properties: A reduced VAT rate of 5% applies on certain conditions of new primary residences.
• play_arrowStamp Duty: Payable on contracts of sale, with rates depending on the contract’s value, but capped to a maximum amount, making it manageable for property buyers.
• play_arrowExemptions for Certain Transactions: Specific property transactions, such as debt-for-asset swaps and qualifying reorganizations, can be exempt from taxes.

Favorable Tax Regime

• play_arrowNo inheritance tax
• play_arrowNo capital gains tax on properties located outside Cyprus.
• play_arrowReduced VAT rates on new primary residences.
• play_arrowExemption from Special Contribution for Defense on dividends and interest for nondomiciled individuals.

The 50% exemption rule under article 8(23A)

Individuals with an annual income in excess of €55.000 who take up first employment in Cyprus from 1 January 2022, will be eligible for an exemption from taxation of 50% of their employment income from sources in Cyprus.

• This exemption applies for a 17 year period commencing from the year of employment.
• The exemption is granted to an individual who has not been a Cyprus tax resident for at least 10 consecutive years prior to the commencement of the employment in Cyprus.
• Subject to grandfathering provisions, individuals who commenced employment in Cyprus prior to 2022, may still claim an exemption under article 8(23A), with an extended duration of the exemption for 17 years as from the date of the commencement of employment in Cyprus.

The 20% exemption rule under article 8(21A)

Individuals who take up first employment in Cyprus after 26 July 2022 with annual remuneration lower than €55,000, will be eligible for a 20% or €8,550 exemption (whichever is lower) from their employment income from sources in Cyprus.

• This exemption applies for a period of 7 years commencing from the year following the year of commencement of employment in Cyprus.
• This exemption is granted to an individual who had been employed outside of Cyprus at a non-Cyprus tax resident employer for at least 3 consecutive years prior to the commencement of the employment in Cyprus.