Cyprus taxes are attractively low for locals and foreigners living on the island with tax residency – whether business owners, employees, self-employed individuals, entrepreneurs, HNWIs, or retirees.
In this article by Property Experts Cyprus, we will take a look at the following taxes and levies which apply to tax residents (companies and individuals) in Cyprus:
- Personal Income Tax (PIT)
- Corporate Income Tax (CIT)
- Special Contribution for Defense (SDC)
- Capital Gains Tax (CGT)
- Inheritance Tax
- Value Added Tax (VAT)
- Property Taxes
- Immovable Property Tax (IPT)
- Immovable Property Transfer Levy (IPTL)
- Transfer Fee (Immovable Property)
- Stamp Duty
- Municipality Tax
- Social Insurance
- General Health Care Contribution
- Withholding Tax (WHT)
Finally, we will take a look at tax breaks and incentives in Cyprus for individuals and businesses.
As a prime tax optimization destination, Cyprus offers many reduced rates and incentives for companies and entrepreneurs.
Cyprus Tax Overview
The tax system in Cyprus has many favorable regulations and incentives for businesses and entrepreneurs, pensioners, and HNWIs alike. The Cypriot Tax Department is responsible for the creation and implementation of tax legislation in the country.
Generally speaking, the tax year runs from the 1st of January to the 31st of December. The due date for tax returns varies, e.g. income tax returns are typically due by the 31st of July the following year.
Spouses are taxed separately on all types of income.
1. Personal Income Tax (PIT)
Cyprus is considered one of the most attractive destinations in terms of personal income tax in Europe and the world.
All individuals that are tax residents in Cyprus are taxed on the income they generate in Cyprus and abroad. This can be income from a business, profits, employment, dividends, interests, pensions, and rental income from immovable property.
Cyprus tax residents
- Individuals who spend more than 183 days per calendar year in Cyprus are considered tax residents.
- Under the “60-day rule” in one calendar year, individuals may also be considered Cypriot tax residents, if they (1) stay in Cyprus for at least 60 days per year, (2) do not live elsewhere for more than 183 days, (3) are not considered a tax resident elsewhere, and (4) do business or are employed in Cyprus.
- “Non-Doms”: Non-Cypriots, unless they are domiciled by birth or because they have lived in the country for 17 out of the last 20 years
Non-tax residents in Cyprus
People who are not tax residents in Cyprus are only taxed on their income from employment in Cyprus, rental of immovable property in Cyprus, and pensions from employment in Cyprus.
Cyprus has 67 double-tax treaties to protect against double taxation on the same income.
Personal tax rates
The tax-free allowance in Cyprus is calculated per person, and the rate is much higher compared to most countries (e.g. 5.151€ in Spain, 9.984€ in Germany, ~12,600€ in Australia). This means a married couple has a tax-free allowance of 39,000€ per year.
| Chargeable Income for Tax Year | Tax Rate |
| Up to 19,500€ | 0% |
| 19,501€ – to 28,000€ | 20% |
| 28,001€ – to 36,300€ | 25% |
| 36,301€ – to 60,000€ | 30% |
| Above 60,001€ | 35% |
Personal Income Tax Exemptions
In the following cases, personal income tax may not apply, depending on your specific personal situation:
- Interests and dividends (may be subject to Special Contribution for Defense – except for Non-Dom – and GeSY – with a 2.65% cap)
- 20%-50% of remuneration from employment in Cyprus, if the individual was not a resident of Cyprus before taking up employment in Cyprus
- Remuneration from employment outside of Cyprus (if not tax resident in Cyprus)
- Retirement or pension lump sums (taxed according to double taxation agreements, together with Personal Income Tax)
- Profits from the sale of securities (shares, bonds, etc.) for companies and individuals (subject to GeSY)
2. Corporate Income Tax (CIT)
At a flat 12.5%, Cyprus has one of the lowest CITs in the EU with only Hungary having a lower rate at 9%.
Companies that are managed and controlled in Cyprus are taxable on the island. They are taxed on their income generated or derived from business activities in Cyprus and abroad.
A non-Cyprus tax resident company is taxed on income from business activities in Cyprus, but foreign taxes can be credited against the Cyprus corporation tax liability.
| Corporate Income Tax | Tax Rate |
| Flat rate | 12.5% |
Corporation Tax Exemptions
Depending on your individual situation, your business may be exempt from certain taxes:
- Interests and dividends +GeSY (may be subject to Special Contribution for Defense)
- Profits from the sale of securities +GeSY (shares, bonds, etc.)
- Gains from foreign exchange differences (forex), except for trading in foreign
- currencies
- 35%-50% of profits from the production of films and series
Corporation Tax Deductions
Interest expense for the acquisition of 100% of the share capital of a subsidiary company.
Expenses related to private motor vehicles may not be deducted, while expenses related to businesses (vehicle purchase, gasoline) may be deducted. Tax losses may be carried forward.
Company reorganizations may be carried out in a tax-neutral manner (e.g. mergers, transfer of assets). Special taxation and exemptions may apply to the shipping industry (ship owners, charterers, ship managers, insurance companies) and film sector.
3. Special Contribution for Defense (SDC)
The Cypriot Special Contribution for Defense (SDC) dates back to the Turkish invasion of Cyprus 1974 and has not since been abolished. Naturally, Cyprus does not require Non-Doms to contribute to the defense of the island for 17 years.
The SDC only applies to the following income earned by SDC-applicable Cyprus tax residents and domiciled individuals. Legal entities that are tax residents in Cyprus are subject to SDC for passive income and rental income.
SDC exemptions apply to non-tax residents in Cyprus and individuals who are Cyprus tax residents but not Cyprus domiciled.
| Type of Passive Income | Individuals | Legal Entities | Comment |
| Dividends | 17% | 0% | SDC instead of PIT/CIT |
| Interest (from active business) | 0% | 0% | SDC instead of PIT/CIT |
| Interest (passive income) | 30% | 30% | SDC instead of PIT/CIT |
| Rental income | 2.25% | 2.25% | SDC in addition to PIT/CIT |
4. Capital Gains Tax (CGT)
A 20% Capital Gains Tax applies to profits from the disposal of
- immovable property in Cyprus
- company shares that directly or indirectly participate in business(es) that own immovable property in Cyprus (min. 50% of the market value of such shares must be derived from the relevant property)
CGT-relevant disposal includes
- exchange
- lease
- abandoning use of right
- granting the right to purchase
Shares listed on recognized stock exchanges are exempt from Capital Gains Tax in Cyprus. Other assets than real estate are not subject to Capital Gains Tax.
| Capital Gains Tax | Tax Rate |
| Flat rate | 20% |
For properties, the gain is defined as the difference between the income from the sale and the original purchase price of the property, adjusted according to the cost of living in Cyprus (index). Losses may be deductible, and CGT exemptions may apply (e.g. donations, family gifting).
5. Inheritance Tax
There is currently no inheritance tax in Cyprus.
6. Value Added Tax (VAT)
At 19%, Cyprus has one of the lowest VAT rates in the EU, only Luxembourg (17%) and Malta (18%) have lower VAT rates. There are reduced VAT rates in Cyprus for some hospitality and tourist services (9%) and specific items like medicine, books, and food items (5%).
| Value Added Tax | Tax Rate |
| Special items (e.g. medicine, books) | 5% |
| Properties | only 5% on 200 sqm of the first property purchase (may not be rented out) |
| Food-related items (e.g. takeaway food) | 5% |
| Hospitality and tourist services | 9% |
| General flat rate | 19% |
VAT applies to local goods and services as well as imported products. Exemptions may apply.
Rental income from leasing immovable property is subject to the standard VAT rate only if the income is above 15,600€ in any 12 months period.
7. Property Taxes
The Immovable Property Tax was abolished in favor of taxes paid directly to the municipality. During the property purchase transaction, transfer fees, stamp duty, and in case of new constructions, VAT, apply.
7a. Immovable Property Tax (IPT)
The Immovable Property Tax in Cyprus has been abolished since January 2017.
7b. Immovable Property Transfer Levy (IPTL)
The IPTL was introduced in 2021. It is applied to sales of immovable properties and has a rate of 0.4%.
7c. Transfer Fees
Transfer Fees of title deeds from one person to another for immovable properties in Cyprus are levied by the Department of Land and Surveys.
| Market Value of Immovable Property | Tax Rate |
| First 85,000€ | 3% |
| 85.001€ – 170.000€ | 5% |
| From 170,001€ | 8% |
Attention: Transfer Fees are not levied if VAT applies upon purchase of the immovable property. In case the immovable property is not subject to VAT upon purchase, a 50% reduction of Transfer Fees is applied.
Whenever more than one person is officially listed on the title deed of a property (e.g. married couples), the Transfer Fee is also reduced.
7d. Stamp Duty
In Cyprus, Stamp Duty is payable on any document which concerns a property in Cyprus as well as official matters to be executed in Cyprus. Some exceptions may apply.
| Stamp Duty | Rate |
| Receipts | 0.07€ |
| Cheques | 0.05€ |
| Bill of exchange | 1€ |
| Certified copy | 2€ |
| Letter of credit | 2€ |
| Power of attorney (limited) | 2€ |
| Letter of guarantee | 4€ |
| Bill of lading | 4€ |
| Power of attorney (general) | 6€ |
| Contract with fixed sum * up to 5,000€ * 5,001€ – 170.000€ * 170,001€ and above | Contract with fixed sum * n.a. * 1.5% (75€ -2,250€) * 2% (3,400€-20,000€ cap) |
| Contract without fixed sum | 35€ |
| Charterparty | 18€ |
| Customs declaration document | 18€-35€ |
7e. Municipality Tax
The annual Municipality Tax is calculated differently in every municipality in Cyprus (sewage, trash collection, street lighting, etc.).
Property owners have to pay Municipality Tax to the local municipal authorities in Cyprus.
| Tax Type | Rate |
| Municipality Tax | 150€ -300€ per year + 25€ -50€ per year per person on the title deed |
8. Social Insurance
The Cypriot Social Insurance Scheme covers individuals who are gainfully occupied in Cyprus (employees, self-employed, military personnel, voluntarily insured individuals).
Social Insurance contributions are made monthly with equal shares by the employer and the employee.
The social insurance tax rate – for both employers and employees – increases every five years until it reaches 10.7% as of 1 January 2039. The subsequent increase will be valid from 1 January 2024.
The social insurance tax rate for self-employed individuals also increases every five years until it reaches 20.4% as of 1 January 2039. The subsequent increase will also be valid from 1 January 2024.
| Social Insurance | Tax Rate (until 31 December 2023) |
| Employment | 8.3% employee + 8.3% employer |
| Self-employed | 15.6% |
In employment cases, the employer is responsible for paying both contributions. Self-employed individuals must contribute 15.6% of their monthly income.
Foreign nationals working in Cyprus must also contribute to the Social Insurance in Cyprus. Exemptions may apply.
9. General Health Care Contribution
In line with the 2019 updated healthcare system GeSY, Cyprus offers high-quality medical services and treatment options at affordable rates.
| Category | Tax Rate |
| Employees | 2.65% |
| Employers | 2.90% |
| Self-Employed | 4% |
| Retirees | 2.65% |
| Government employees (local authorities) | 2.65% |
| Republic of Cyprus or Natural/Legal person responsible for the income of persons holding an office | 2.90% |
| Persons earning rental income, interests, or dividends | 2.65% |
| Republic’s Consolidated Fund | 4.70% |
General Healthcare Contributions are capped at 180,000€ annual income for employees (2.65%). All income (including dividends, etc.) is considered for this capped amount.
Employers withhold salary-relevant contributions from their employees and remit these together with their social contributions to the Cypriot social insurance department.
10. Withholding Tax (WHT)
Cyprus does not impose a Withholding Tax on
- dividends
- interests
- royalties paid to non-residents of Cyprus
This makes a Cyprus LTD company set up a very attractive model for holding companies.
In Cyprus, only royalties earned on rights used within Cyprus are subject to Withholding Tax as follows
| Withholding Tax | Tax Rate |
| Dividends, Interests, and royalties paid to non-residents of Cyprus | 0% |
| Cinematograph films | 5% |
| Royalties earned on rights used within Cyprus | 10% |
As of 1 January 2023, Cyprus is planning to impose a Withholding Tax for EU blacklist countries.
Tax Breaks & Incentives
Cyprus is known for its favorable tax regulations for companies and individuals. Here are the most popular and latest tax breaks and incentives on the island.
Non-Dom
“Non-domiciled” is a tax status and is unrelated to nationality, citizenship or residency status, although it can be affected by these factors. Non-Dom status has to be applied for and approved by the Cypriot tax department.
Cypriot Non-Dom tax residents only have to pay GeSY. For Non-Doms in Cyprus, Special Contribution for Defense does not apply, and, therefore, interests and dividends as well as sales of securities are tax-exempt.
This Non-Dom status can be kept for 17 years before individuals are considered domiciled and SDC tax applies.
Pensioners & Retirees
Foreign pension income above 3,420€ per year is taxed at a flat 5% rate. International retirement income below that is tax-free.
Incentives to Attract Foreign Workforce & Headquartering
In mid-2022, the Cypriot government approved tax incentives to attract foreign labor talent and promote headquartering on the island
With this new bill, new employees/residents in Cyprus (e.g. when a company relocates to Cyprus with its employees = headquartering)
- receive a 50% tax break on income above 55,000€ p.a. (formerly 100,000€ p.a.)
- receive a 20% tax break on income below 55,000€ p.a. (formerly 100,000€ p.a.)
- enjoy these tax breaks for 17 years (formerly 10 years)
In practice, this looks as follows under the new bill:
- up to 54,999€ remains progressive (0-30%) with tax breaks up to 20%
- 55,001€ and above (30%-35%) with tax breaks up to 50%
This also applies to entrepreneurs who pay themselves a salary, e.g. as CEO, to which income tax applies.
Simplified Tax Compliance & Audit Requirements
Finally, simplified Cypriot tax compliance and audit requirements for companies and individuals have been announced starting from January 2023.
- companies with a net turnover of more than 200,000€: full audit by a statutory auditor/firm
- companies with a net turnover of max. 200,000€ and a total balance sheet of max. 500,000€ in the last two years: limited assurance review
- self-employed individuals with a turnover of 70,000-200,000€ and a balance sheet of max. 500,000€ in the last two years: limited assurance review
- self-employed individuals with max. turnover of 70,000€: no financial statement
Few exceptions apply, e.g. parent companies that must prepare consolidated financial statements.
Film Industry Incentives
Cyprus offers the highest discount rates in Europe for the film industry. Up to 40% of eligible expenditures on the island can be asserted.
For feature films, the minimum expenditure is 200,000 Euros. For TV drama series or self-contained drama films, the minimum expenditure is 100,000 Euros.
Shipping Industry Incentives
Tax breaks on income from shipping activities by an owner of a Cyprus ship apply. No tax or withholding tax on dividends from profits arising out of the operation of a Cypriot ship apply.
Cyprus Tax Overview – The Takeaway
To sum up the topic of taxes in Cyprus, here is an overview.
| Tax Type | Tax Rate |
| Personal Income Tax (PIT) | 20%-35%, with 19,500€ per person per year tax-free (20%-50% tax breaks may apply) |
| Corporate Income Tax (CIT) | 12.5% |
| Special Contribution for Defense (SDC) | 0%-30% |
| Capital Gains Tax | 20% |
| Inheritance Tax | n.a. |
| Value Added Tax (VAT) | 19%, reductions may apply |
| Property Taxes * Immovable Property Tax (IPT) * Immovable Property Transfer Levy (IPTL) * Transfer Fees (Immovable Property) * Stamp Duty * Municipality Tax | Property Taxes * N.a. * 0.4% * 3%-8%, exemptions & reductions may apply * 0.07€-20,000€ * 150€ -300€ per year + 25€ -50€ per year per person on the title deed |
| Social Insurance | 8.3%-15.6% (until 31 December 2023) |
| General Health Care Contribution | 2.65%-4.70% |
| Withholding Tax (WHT) | 0% (exemptions with 5%-10% apply) |
Have we sparked your interest? Are you a tax resident in Cyprus – whether a local or a foreigner? The specialists on real estate and living in Cyprus at Property Experts Cyprus are looking forward to talking with you about your next move. Redeem your FREE consultation here.
Disclaimer: The information in this article on Cyprus taxes has been researched to the best of our knowledge and is dated Q3/2022. Government regulations may change and taxation depends on your very specific personal situation.
