Updated: April 30, 2024
Cyprus (or “the Republic”) offers an attractive taxation system, having one of Europe's lowest corporate tax rates. Moreover, as a member of the European Union, Cyprus is committed to fairness, justice, and the rule of law. At the same time, the Cypriot system benefits from the expertise of the European Commission on finance, competition, and corporate governance. This page contains general guidance on Cyprus tax rules and indicates the general framework of the taxing system.
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The Cyprus Income Tax Laws apply identically to individuals (physical persons) and companies (legal persons). According to Euraxess Cyprus (euraxess.org.cy), partnerships are not taxed as separate units: each partner is taxed according to income. Husband and wife are taxed separately. The tax year in Cyprus is the calendar year.
A person is a resident of Cyprus for tax purposes if he/she remains in Cyprus:
A person who earns more than 19,500 euros per year pays income tax. Personal income tax (PIT) rates apply; for example, between 19,501 to 28,000 euro income, the rate is 20%.
Tax is charged on income from employment, trade, rent, profits from property, pensions, and annuities. Artists or sports personalities from abroad pay a 10% tax on their income from Cyprus.
A high earner is a person who earns more than 100,000 euros per year. A high-earning person moving to Cyprus will get a 50% deduction for the first ten years.
Self-employed persons pay 15.6% of their income for social security (some limits apply, set annually). The tax due must be estimated by 31st July each year, and the tax is paid in two equal instalments on 31/7 and 31/12. If a self-employed person earns over 70,000 a year, he/she must submit audited financial statements.
Employers and employees each contributed 8.3% to social security.
Since December 31st, 2023, employers and employees have contributed 8.8%, and the state has contributed 5.2%.
Companies should file annual tax returns. These are prepared using audited financial statements. The deadline to file an annual return is 31st December.
Cyprus provides one of the lowest corporate income tax rates in Europe. The standard rate is 12.5% of the company’s worldwide income from outside and within Cyprus. There are exceptions to corporate income tax, such as income from dividends and profit from the sale of securities.
Tax residents will need to pay taxes on their rental income.
In detail, the tax obligations for rental income in Cyprus are as follows:
As of January 2021, 20% of gross rental income is deducted from tax.
A special contribution for the defence applies to certain income types, such as dividends, interest, and rental income. The rate is 17%, but for rental income, see above.
Individuals pay SCD if they are both Cyprus tax residents and Cyprus domiciled. Cyprus domiciled means one of two things. Either that, first, they have a domicile (a home) from birth in Cyprus. Or they have got and retained a home in Cyprus (as per the Wills and Succession Laws); or, second, they have been tax residents of Cyprus for 17 out of 20 tax years before the year in question.
Companies pay SCD if they are tax residents of Cyprus.
Non-tax residents do not pay SCD.
The real estate tax was abolished on 1st January 2017. Now the municipality charges real estate taxes as an annual municipality tax. The amount depends on the property's value, while rates may vary according to location. A community (local authority) charge will also apply.
Transfer fees may be charged depending on the value of the land. There would be no transfer fee if VAT was charged when buying the land. VAT is charged on new properties at a rate of 19% (with exceptions for reduced VAT for first primary residences) unless the building permit for the new property was granted before 1st May 2004.
Companies earning more than 15,600 euros for the last twelve months must be VAT registered. Self-employed must also be VAT registered and subject to VAT rules and regulations. VAT is payable electronically four times a year.
Since 1 March 2020, employees and pensioners have contributed 2.65% of their monthly income to the GHS. Employers pay 2.90% of each employee’s salary to the GHS, and self-employed individuals contribute 4%.
Registration for income tax (form T.D. 2001) and VAT registration (if applicable) (form T.D. 1101) is required. The individual or company will then receive a Tax Identification Code (TIC) and a VAT registration certificate (if applicable). All the forms to be filled out are available at mof.gov.cy.
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How much is tax in Cyprus?
Tax residents of Cyprus are taxed on their worldwide income, beginning with a rate of 20% for income of EUR 19,501 to 28,000. You are a tax resident of Cyprus if you live in Cyprus for 183 days in a tax year (1st January to 31st December). If you are not a tax resident of Cyprus, you will be taxed (at the same rate) on your income from the Republic. There is no tax for dividends or interest, no inheritance or property tax. Companies are taxed at the rate of 12,5%. Foreign pensions are taxed at the flat rate of 5%, with the first EUR 3,420 exempt from tax and the option to pay the normal rate. Certain types of income are subject to a special defence contribution tax (normally 17% but may be higher depending on the type of income) for persons who are tax residents and tax domiciled in the Republic. To be tax-domiciled, a person must reside in the Republic for 17 years out of 20, the year tax paying will start exempted. There is also a VAT at the rate of 19%, with reduced VAT applying to certain types of activity.
Do foreigners pay taxes in Cyprus?
Foreigners in Cyprus pay tax on their income coming from Cyprus. However, if they are tax residents of Cyprus (that is, spend 183 days in Cyprus in a year), they pay tax on their worldwide income. Cyprus has double tax treaties with several countries and tax benefits for foreigners to ease the financial burden of relocating.
Why is Cyprus considered a tax haven?
Cyprus has always been a centre for international business and commerce, attracting third-country nationals worldwide. It has created laws that make entrepreneurship and relocation easier through taxes and efficient corporate and commercial legislation, benefiting entrepreneurs and third-country nationals wishing to do business or relocate to Cyprus. Benefits include no tax on dividends and interest, no inheritance tax, no capital gains tax for property from abroad, a low corporate tax rate (12,5), an IP package tax, exemptions on income levels for high-skilled personnel of foreign companies, etc.
What is VAT in Cyprus?
VAT in Cyprus is paid at the rate of 19%. Nevertheless, there is a reduced VAT of 5% or 9% on several types of goods and services (depending on the type of goods or services) and a reduced VAT of 5% for the first 130 square metres of primary residence upon certain conditions.
What are the tax rates for individuals in Cyprus?
The tax rates for individuals in Cyprus are as follows. The first EUR 19,500 of annual income is not taxable. Then, up to EUR 28,000 is taxable at 20%. Up to EUR 36,300 income is taxed at 25%, up to EUR 60,000 at 30%, and EUR 60,001 and over at 35%.
Who is considered to be “domiciled” in Cyprus?
If you have a domicile of origin in the Republic, you are considered domiciled in Cyprus if 1) you have a home from birth or 2) you have and retained a home in the Republic. In such a case, you will be domiciled for tax purposes unless 1) your residence of choice is abroad for at least twenty years preceding the tax year, or 2) you have not been a resident of the Republic for at least twenty years preceding the tax year. Foreigners (EU and third-country nationals) are domiciled in Cyprus if they have been tax residents of Cyprus for 17 out of 20 years. The twenty years do not include the tax year in which you start paying tax.
What company is considered to be a resident company of Cyprus?
A company is resident in Cyprus if managed and controlled in Cyprus (this is the so-called “real seat” theory).
How large is the corporate tax rate for companies?
Companies pay a corporate tax rate of 12,5%, among the lowest corporate tax rates in the European Union (EU).
George K. Konstantinou
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