Immigration. Travel. Living.

Cyprus: tax system guide

Cyprus beach

Aside from the fact that the country is a magnet for foreigners looking for an affordable EU destination, Cyprus is a safe and pleasant place to live. With crime rates as low as 6.44 crimes per 1,000 inhabitants every year, it is one of the safest places to live on Earth.

Cyprus is popular for its hospitality. Foreigners of all nationalities and races are immediately welcomed by the country’s residents on arrival. Once you touch down, you will feel right at home in any part of the country.

Its hospitable personality also extends to your finances. Cyprus has a reputation for being a tax haven and offers one of the most enticing tax regimes.

Cyprus allows you to enjoy very low corporate taxes, a high-income tax threshold, tax-free interest for up to 17 years, no capital gains tax on shares, and reliable double taxation treaties with more than 60 countries.

How great is that?

It’s no wonder why a lot of Russian, Brits, and Americans migrate to the country to escape huge taxations in the countries. As a small business owner, you can also set up an EU base in Cyprus without breaking your bank.

As a result, apart from the expats who chose Cyprus as their home, there are also many holding companies opting to set up their international base in the country.

If you plan to travel to Cyprus, We are going to tell you all about the taxation system being used in the country from personal levies to corporate taxes. By the time you are done reading this guide, you should know everything there is to about the taxation system in Cyprus.

How the system works

The tax year in Cyprus is the same as one calendar year. It begins on the 1st of January and runs till the 31st of December every year. The system is different for everyone depending on their status as an employee or a self-employed individual.

For employees, the tax is withheld by their employer, while self-employed individuals file their taxes through Cyprus’ self-assessment and provisional systems.

Employees must file theirs before the 30th of April each year, while self-employed individuals must file before the 30th of June (or 31st of December, if they need to file for audited accounts). You can file in any local tax office or electronically via the Taxisnet website.

Cyprus has a double taxation treaty with more than 60 countries including the 28 EU member states, the UK, The United States, Lebanon, China, Canada, Australia, Syria, Qatar, South Africa…

Who pays tax in Cyprus?

All Cyprus tax residents are individually taxed on all chargeable income derived from all sources worldwide. The country uses a very high non-taxable income threshold.

Residents that earn below €19,500 qualify for tax-exemptions. This secures a good quality of life and affordable standard of living for residents considering the economic situation of the country.

Non-residents are taxed only on their Cyprus-source income from employment, a permanent establishment, business, rental of immovable property, and pensions from employment exercised in the country.

If you spend more than 183 days in a calendar year in the country, regardless of whether you are an EU citizen or not, you are required to pay taxes on your worldwide income.

Local and international companies that accrue profit in Cyprus are also obligated to pay taxes for any income they acquire in the state regardless of whether they have another branch elsewhere.

Income Tax

Personal income taxes are levied on all legal residents at a progressive rate between 0% and 35%. Employment income is The tax year in Cyprus is the calendar year. subject to various social security contributions.

Apart from income tax, the state uses a 19% VAT on all goods and services. However, some goods & services are tax-free. There are also tax allowances for trade union fees, a donations to charities, and there’s no inheritance tax & capital gains tax (for the selling of shares) in Cyprus

The table bellowed contains details on how incomes are taxed in Cyprus.  

Annual income Tax rate
Under €19,500 0%
€19,500 – €28,000 20%
€28,000 – €36,300 25%
€36,300 – €60,000 30%
Above €60,000 35%

 

Expatriate Taxes

If you’re an expat residing in the country, you will be taxed only on profits and other benefits from the business, employment, dividends, interest, discounts, pensions, or rental from immovable property that you acquired in Cyprus.

If you stay longer than 183 days in a year, you will be taxed as a resident and will be required to file your taxes like normal residentsThe tax rate for foreign pensions is around 5% but the first €3,417 is tax-exempt.

Corporate Taxes

A company is also taxed as a resident in the Republic on certain income generated from activities carried out through its establishment in Cyprus. The normal Employment income is also subject to various social security contributions. The corporate tax rate in Cyprus is 12.5%. The Income Taxation Laws also provide exemptions on certain types of income, profit, and gain.

This European country also initiated a scheme that allows an automatic Exchange of Financial Information in Tax Matters program. Countries that participate in this program send tax-related banking information of noncitizen account holders to the tax authorities of their home country.

This way, the authorities of these countries can track discrepancies and persecute its citizens for taxes owed.

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