Tax Benefits for Individuals
Cyprus offers a highly attractive and transparent tax regime for individuals, making it an ideal location for tax residency.
- Tax-Free Threshold: The first €19,500 of annual income is tax-exempt.
- Progressive Tax Rates: Income above €19,500 is taxed progressively from 20% to 35%, with the highest rate applying to income exceeding €60,000.
- Higher Earnings Retention: The progressive structure enables individuals to retain more of their income, supporting a higher standard of living.
Tax Residency
- 183-Day Rule: Tax residency is established by spending more than 183 days in Cyprus per calendar year.
- 60-Day Rule: Alternatively, individuals can qualify by spending at least 60 days in Cyprus, not being tax residents elsewhere, not residing in another country for more than 183 days, and maintaining economic ties to Cyprus (e.g., property ownership or business activity).
Capital Gains Tax Exemptions
- Overseas Capital Gains: Profits from the sale of real estate or financial assets located outside Cyprus are exempt from Capital Gains Tax.
- Cyprus Property: Capital gains tax applies only to disposals of immovable property located in Cyprus or shares in companies holding such property.
Double Tax Treaties
- Wide Treaty Network: Cyprus has over 65 double tax treaties that reduce or eliminate withholding taxes on cross-border income such as dividends, interest, and royalties.
Wealth Transfer Without Tax
- No Inheritance Tax: Cyprus abolished inheritance tax in 2000, allowing assets to be passed on tax-free.
- No Gift Tax: Gifts between individuals are not subject to taxation, preserving intergenerational wealth.
Tax Benefits for Businesses
- Corporate Tax: One of the lowest corporate tax rates in the EU at 12.5%.
- Dividend Exemptions: Dividends received from qualifying subsidiaries are tax-exempt, allowing efficient profit repatriation.
- IP Regime: 80% exemption on net income from qualifying intellectual property assets.
- Royalty Income: Tax exemptions apply to royalty income under Cyprus’s IP regime.
- Loss Carry Forward: Businesses can carry forward tax losses for up to five years.
- Capital Gains: Gains from the sale of shares or immovable property abroad are generally tax-exempt.
Tax Benefits for Non-Domiciled Residents
Non-Domiciled (Non-Dom) status in Cyprus offers extensive tax exemptions and is available to individuals who become Cyprus tax residents but are not domiciled in Cyprus under local law.
- Duration: Non-Dom status provides tax benefits for up to 17 consecutive years.
- Dividends and Interest: 0% tax on worldwide dividend and interest income due to exemption from Special Defence Contribution (SDC).
- Capital Gains: No tax on profits from the sale of securities or assets located outside Cyprus.
- Wealth Preservation: No inheritance or gift tax ensures smooth intergenerational wealth transfer.
With its business-friendly environment, clear legal framework, and favorable tax policies, Cyprus continues to attract individuals and companies seeking efficiency, flexibility, and financial security.
Additional Details: Cyprus Tax System Explained
Personal Income Tax Explained
Cyprus operates a progressive personal income tax system. The tax bands are as follows:
- 0%: For income up to €19,500
- 20%: For income from €19,501 to €28,000
- 25%: For income from €28,001 to €36,300
- 30%: For income from €36,301 to €60,000
- 35%: For income exceeding €60,000
This favorable structure makes Cyprus an ideal destination for salaried professionals and business owners alike. There are also specific allowances and deductions for social insurance contributions, life insurance premiums, and contributions to approved pension and provident funds.
Non-Domiciled Tax Status in Depth
To be considered a ‘non-domiciled’ resident, you must not have Cyprus as your domicile of origin (typically inherited from your father). This status is especially attractive for high-net-worth individuals who earn significant passive income from abroad.
Benefits include full exemption from Special Defence Contribution (SDC), which would otherwise apply at:
- 17% on dividends
- 30% on interest income
- 3% on rental income (after 25% allowable deduction)
Non-Dom status is automatically lost after 17 years of being a Cyprus tax resident, but the tax savings during that period can be substantial, particularly for investors, retirees, and international executives.
Cyprus Intellectual Property (IP) Regime
Cyprus offers one of the most competitive IP regimes in Europe, in line with OECD guidelines. Under this regime:
- 80% of the qualifying net profits from the use or sale of IP assets (e.g., patents, copyrights, trademarks) are tax-exempt
- Only 20% of the qualifying income is subject to the standard corporate tax rate of 12.5%
- Effective tax rate on qualifying IP income can be as low as 2.5%
Qualifying assets must be developed in-house and include patents, copyrighted software, and other legally protected IP. This makes Cyprus highly attractive to tech companies, R&D centers, and IP holding entities.
Capital Gains Tax on Real Estate
Capital Gains Tax (CGT) in Cyprus is only imposed on the disposal of:
- Immovable property located within Cyprus
- Shares in companies that own such property (proportionate to their value)
CGT is levied at a flat rate of 20%, but certain exemptions apply, including:
- €85,430 for lifetime disposals of private residences (if the property was the main residence for at least 5 years)
- €25,629 lifetime exemption for agricultural land disposals by farmers
- €17,086 for other property disposals
Corporate Deductions & Group Relief
Cyprus allows generous tax deductions and group relief measures, including:
- Full deduction of business expenses incurred wholly and exclusively for the production of income
- Group loss relief among Cyprus tax-resident group companies
- Notional Interest Deduction (NID) on new equity: This incentivizes companies to raise equity rather than debt by allowing a tax-deductible notional interest on qualifying capital injections
