3016 Limassol, Cyprus
41, Misiaouli & Kavazoglou Street, 2nd Floor, Office 201
+357 96 63 66 26
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Over the past years, Cyprus has developed into one of the most favorable destinations for international business.
Cyprus has been a member state of the EU since 2004 and a member of the Eurozone since 2008
The accession of Cyprus to the European Union triggered a bold tax reform that aimed towards the alignment of the legislation with EU’s Acquis Communautaire and Code of Conduct of Business Taxation as well as the compliance with the requirements of the Organisation for Economic Co-operation and Development (OECD).
The result of this reform was a sophisticated low tax jurisdiction that rapidly became the jurisdiction of choice for international investors and the premier financial center for the set-up and operation of Cyprus companies.
Main Tax Advantages
FOR COMPANIES
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Exemption from tax on
dividend income
dividend income
Income from dividends is exempt from tax regardless of its source. Exemption to the general rule is when:
The company paying the dividend engages in more than 50% of its activities in producing investment income
The company paying the dividend enThe company paying the dividend engages in more than 50% of its activities in producing investment incomegages in more than 50% of its activities in producing investment income
Full exemption from Cyprus tax on gains from the disposal of securities (shares, debentures, founders’ shares, units of Cyprus funds open – ended and close – ended collective investment schemes etc) regardless of whether the gain is considered to be of capital or revenue nature
Exemption from capital gains tax and income tax on the disposal of securities
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No capital gains tax or income tax on the disposal of the shares of a Cyprus Company
The disposal of the shares of the Cypriot Company will not result in any Cyprus taxes irrespective of the provisions of a double tax treaty.
Non – resident and non – domicile shareholders’ dividends are exempt from withholding taxes. Royalties in respect of intellectual property rights used outside of Cyprus are exempt from withholding taxes.
No withholding taxes on payment of dividends and interest
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Full adoption of the EU Directives beneficial to Cyprus companies
For example the EU parent – subsidiary Directive. According to the provisions of the Directive, any payment of dividend from one member state to another is free of withholding tax provided the required conditions are satisfied under the local legislation of the member state.
80% exemption is granted on Cyprus company’s profits from intellectual property if intellectual property is owned by Cypriot resident company (net of any direct costs). Direct costs will exclude Intellectual Property acquisition costs, interest, immovable property and payables to third parties.
Cyprus intellectual property regime
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Reduced withholding tax on dividends received from countries which Cyprus has concluded a double tax treaty with
Cyprus double tax treaty network is extensive and expanding with over 50 countries. Cyprus double tax treaty network can be used by the investor to minimize tax burden.
Real estate or other assets can be held in a Cypriot company and are exempt from capital gains tax provided that the above are outside the territory of the Republic of Cyprus.
Capital gains and income tax exemption for real estate
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Permanent establishment abroad
Profits earned in Cyprus from a permanent establishment abroad are exempt from tax.
If the respective income is subject to Cyprus tax, relief for taxes paid abroad is offered in the form of a tax credit. The relief is given unilaterally irrespective of the existence of a double tax treaty. Where a double tax treaty exists, the treaty provisions apply if more beneficial.
Unilateral foreign tax credit relief
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Main Tax Advantages
FOR INDIVIDUALS
Cyprus offers considerable incentives for personal tax residency. Complementing the tax legislation are the island’s ideal geographical location, its EU membership, its robust legal system and reliable political environment.
With regard to personal taxes, Cyprus has one of the lowest top statutory personal income tax rates of 35% for net income exceeding €60.000 annually and no tax on net income of up to €19.500. At the same time, it also offers a number of very attractive personal tax incentives, through tax exemptions and deductions, in order to attract high net worth individuals of all ages.
Below is an analysis of the main provisions of Cyprus’ personal income tax regime as well as the key tax incentives provided to individuals who wish to relocate to Cyprus.
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Non-Domicile Status
As from 16 July 2015, Cyprus has introduced a special tax regime for new tax residents. In brief, if you:
You are not of Cypriot origin.
You have not resided in Cyprus for at least 17 out of the last 20 years, then, after becoming a Cyprus tax resident, you shall be exempt from taxes on interest and dividend income, received both in Cyprus and/or abroad, for the next 17 years.
Any gains arising from the disposal of shares, bonds and other similar equity financial instruments are exempt from income tax.
Exemptions on gains arising from the disposal of securities
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No tax on wealth, gift, inheritance and endowment
Wealth Tax
There is no net wealth tax in Cyprus.
Gift Tax
There is no gift tax in Cyprus. The following gifts or donation of real estate property are exempt from Capital Gains Tax:
Transfer by reason of death.
Gifts to relatives within the third degree of kindred.
Gift to a company of which the shareholders are and continue to be members of the disposer’s family for five years after such gift.
Gift by a company, of which all the shareholders are members of the same family, to any of its shareholders when the property gifted had been acquired by the company as a gift. The property must remain in the hands of the done for a period of at least three years.
Inheritance Tax
There is no inheritance tax in Cyprus. Income received from individuals by way of an inheritance is not subject to any taxation in Cyprus.
Endowment Tax
There is no endowment tax in Cyprus. The income arising from a scholarship, exhibition or any other educational endowment held by an individual receiving full-time instruction at a university, college, school or other recognized establishment is exempt from tax.
Profit arising from the disposal of immovable property situated outside Cyprus is exempt from any taxation (including capital gains tax) in Cyprus, although the foreign property may be subject to tax in the jurisdiction where it is located.
Exemption from capital gains tax on sale of real estate
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Income tax exemption for overseas employment
Where an employee is Cyprus tax resident, then salaries from rendering services outside Cyprus to a non-resident employer or to an overseas permanent establishment of a resident employer for more than 90 days in a tax year are exempt from income tax. In order for the 90 day rule to apply there must be an employee/employer relationship.
The lower of 20% of income or €8.550 annually, on remuneration from any office or employment exercised in Cyprus by an individual who was not a Cyprus tax resident before the commencement of his/her employment, for a period of 7 years commencing from 1st January following the year of commencement of the employment. This exemption applies for employment started after 26 July 2022.
As of 1 January 2022, a new 50% exemption on remuneration applies from any office or employment exercised in Cyprus by an individual who was not a Cyprus tax resident before the commencement of his/her employment, for a period of 15 years if the annual remuneration exceeds €55.000.
Previously, for employments commencing until 26 July 2022, 50% and 20% exemptions were available subject to different conditions than the conditions that apply currently. These exemptions were available for a period of ten or five years, respectively. Eligible individuals may continue to claim the exemption even after 26 July 2022 for any remaining period.
Substantial Tax Relief for non-residents taking up employment in Cyprus, during the first years of their employment
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Advantages available on pension income
A Cyprus tax resident receiving a pension from abroad can choose one of the following two options to be taxed on the pension income, the choice being available every year:
the pension can be taxed under the progressive income tax rates with the first €19.500 of net taxable income being tax-free
the first €3.420 of the foreign pension being tax free, with the remaining balance being taxed at a flat rate of 5%.
Our services are provided in cooperation with duly certified and accredited business partners and associates
NEED MORE INFORMATION?
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