Taxes for individuals in Cyprus.
Tax optimization for individuals

Since 1992, Feod Group has been providing a wide range of immigration, corporate and legal services in Cyprus and other EU countries

Offices:

Tax consultations
Services for developing tax planning strategies for individuals in Cyprus
Selection of the best tax regimes and benefits

Tax optimization for individuals in Cyprus

The tax system in Cyprus is considered one of the most popular and profitable in the European Union, allowing you to legally minimize personal and corporate taxation.

Cyprus provides unique tax advantages for residents. The island’s tax system includes a low corporate tax, making it attractive to entrepreneurs. However, there are also a number of benefits for individuals.

Cyprus tax advantages for individuals

Cyprus tax benefits for individuals are extensive, covering several key aspects:

✔️Income tax and social charges

Cyprus offers some of the lowest rates of income tax and social charges in the EU, providing individuals with significant tax benefits.

There are also income tax benefits available when foreign individuals move to work in Cyprus.

✔️A large number of double taxation agreements

More than 65 signed agreements for the avoidance of double taxation with various countries create favorable conditions for individuals engaged in international activities and eliminate the risk of double taxation.

✔️No taxes on wealth and inheritance

Cyprus has no wealth or inheritance taxes, making it an attractive destination for individuals seeking to preserve and transfer their assets.

✔️No annual property tax

Individuals in Cyprus are exempt from the obligation to pay annual property tax, which provides additional tax benefits.

✔️Benefits for income from intellectual property

Special conditions for taxation of income from intellectual property allow individuals to effectively manage their intellectual assets.

✔️Low corporate tax rate

The corporate tax rate is 12.5% and is among the most attractive in the EU. This benefits entrepreneurs and beneficiaries by providing favorable conditions for business and investment.

Read more: Taxes for business in Cyprus

Tax residents and non-residents in Cyprus: what you need to know

A Cyprus tax resident is an individual who is subject to taxation in Cyprus on the basis of his domicile, residence, social and economic ties with the country.

In other words, your tax residence status determines in which country you are required to pay taxes on your income.

All individuals who are tax residents of Cyprus are taxed on their worldwide income.
Individuals who are not tax residents of Cyprus are taxed only on certain types of income accrued or derived from sources in Cyprus.

The distinction between tax residents and non-residents plays an important role in tax planning in Cyprus. Understanding residency and income reporting rules will help individuals make the most of tax benefits.

In order to take full advantage of the tax system and optimize their taxes, individuals have two options to become a tax resident of Cyprus.

When does an individual become a Cyprus tax resident?

You can obtain Cyprus tax resident status using the “183 day rule” or the “60 day rule”.

An individual is considered a tax resident of Cyprus in accordance with the “183 days rule” if he spends more than 183 days in Cyprus in one calendar year, without any additional conditions or criteria.

The second alternative, the “60 days rule”, allows individuals to become a Cyprus tax resident after spending only 60 days on the island and subject to certain conditions:

does not reside in any other country for more than 183 days and is not considered a tax resident of another country;
resides in Cyprus for at least 60 days;
the individual must carry on a business in Cyprus and/or be employed in Cyprus and/or be a director of a company registered in Cyprus at any time during the tax year;
The applicant must have a permanent residence in Cyprus.

Taxes for individuals in Cyprus: types and rates

Taxes applicable to individuals in Cyprus include the following:

Personal Income Tax or income tax.
Contributions to state social and health insurance funds.
Capital gains tax
VAT

Income tax for individuals in Cyprus

Personal income tax (income tax in Cyprus) operates on a progressive scale from 0% to 35%. The first 19,500 euros are tax-free.

Income tax rates in Cyprus:

up to 19,500 € – 0%
19,501 to 28,000 € – 20%
28,001 to 36,300 € – 25%
36,301 to 60,000 € – 30%
60,001€ and more – 35%

Income tax benefits in Cyprus

Under the new provisions of the income tax legislation, there is a 50% reduction in income tax for a period of 17 years for foreigners working in Cyprus with a salary of more than €55,000 per year. This exemption will be available for 17 years.

Contributions to state social and health insurance funds

Employees’ contributions to state social insurance funds amount to 8.8% of their gross remuneration.
The 8.8% rate applies from 01 January 2024 for both the employee and the employer. The rate will increase every five years thereafter, reaching 10.7% on 1 January 2039.

In the case of contributions of self-employed persons to state social insurance funds, they amount to 15.6% of their income. This rate will also increase every 5 years, reaching 20.4% by January 1, 2039. The amount of contributions is limited to minimum and maximum limits, which are determined depending on the profession or type of activity of the self-employed person and are regulated annually.

Contributions of individuals to the state health insurance fund (GeSY)

Company employees – 2.65%

This category includes workers who receive wages from companies. Their contributions to GeSY are 2.65% of their gross remuneration.

Income of self-employed persons – 4%

Self-employed persons, including sole proprietors, are required to contribute 4% of their income to GeSY. This applies to individuals engaged in self-employed activities.

Officials – 2.65%

Contributions for salaried officials are also set at 2.65%. This includes persons holding certain public or private positions.

Capital gains tax

Applies only to profits attributable to real estate at a rate of 20% of the profit received – the difference between the sale and purchase price.

Tax is levied on income from the sale of immovable property located in Cyprus or from the sale of shares in companies owning immovable property located in Cyprus.

There is no obligation to pay capital gains tax in Cyprus in the following cases, as an example:

There is no capital gains tax on the transfer of property or shares as a gift to relatives up to the third degree or to a family firm. An important condition is that shareholders must remain family members of the previous owner for at least five years after the gift.
There is no capital gains tax on the transfer of ownership due to the owner’s death or missing person.
No capital gains tax applies to assets transferred to charitable or government organizations.

VAT (Value Added Tax)

VAT is charged on the provision of goods and services in Cyprus, as well as on the purchase of goods from the European Union and the import of goods into Cyprus. The standard VAT rate in Cyprus is set at 19%. In addition, the country has two reduced VAT rates: 9% and 5%.

For example, VAT on the purchase of real estate in Cyprus is 19%, but legislation allows for a potential tax reduction of up to 5% under certain conditions.

Updated Rules for Calculating 5% VAT on Real Estate Purchases in Cyprus

For detailed information on the procedures for calculating and paying taxes in each specific case, please contact our Cypriot specialists for advice!

TAX CONSULTATION IN CYPRUS

FAQ – Taxes for individuals in Cyprus

What are the main types of taxes that individuals are required to pay in Cyprus?

Individuals in Cyprus are required to pay income tax, insurance and social contributions, capital gains tax depending on income and property.

What benefits and tax exemptions are there for individuals in Cyprus?

Individuals can take advantage of the benefits of Cyprus such as no wealth tax, no gift tax, no dividend tax, no interest tax, and no annual property tax. There are also special programs for new residents such as Non-Domicile Status, as well as income tax benefits for foreigners working in Cyprus with an annual salary of more than 55 thousand euros.

What is the tax payment procedure for individuals and what are the deadlines for filing returns in Cyprus?

Cyprus tax resident individuals must file income tax returns annually. However, persons with an annual income below a certain level are exempt from filing income tax returns (for example, in 2023, persons whose annual income is below €19,500 are not required to file a return).

Payment of taxes is carried out according to the established deadlines, and the tax office provides convenient methods and online services for compliance with the procedures. Information about the tax calendar can be found on the official website of the Cyprus Tax Department.

Article author

Anastasia Taran Head of Corporate Services
Ukraine

In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes i...

family and corporate immigration solutions.
establishing a business in Europe.
personal and corporate taxation in Europe.
opening accounts in European banks.
obtaining a tax resident status.

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