Cyprus Tax System

Cyprus tax system offers a number of benefits to both legal entities and individuals.

А. Advantages of Cyprus legal system for the legal entities (companies):

  • Cyprus tax resident companies are subject to the corporate tax at the rate of 12.5%, one of the lowest in the European Union, and there is no distinction between local and international companies.
  • Dividend income received from abroad is not taxed (under certain conditions).
  • No capital gain tax (except for the sale of the real estate located in Cyprus).
  • No real estate tax (cancelled from January 1, 2017).
  • Taxable losses can reduce the company’s profit for 5 years.
  • Capital gains from the sale of the qualified securities: 100% tax exemption.
  • Tax neutrality in relation to the exchange rate differences, except when they arise from the trading in the currencies of foreign exchange derivatives.
  • No withholding tax on the outgoing payments (dividends-interest-royalty) for non-Cypriot tax residents (companies or individuals) under certain conditions.
  • The profit of a permanent establishment abroad is exempt from the tax (subject to certain conditions).
  • Tax-free corporate re-domiciliation is permitted.
  • Possibility of establishing SE (European company).
  • Applicability of all the EU directives.
  • There is a preliminary decision practice.
  • Extensive network of the agreements on the avoidance of double taxation.
  • The company restructuring rules based on the EU Merger Directive allow for a tax-neutral group restructuring.

Other tax benefits and incentives include:

  • Application of the notional interest deduction regime: new capital presented to the company from January 1, 2015 in the form of the paid-in share capital or share premium may be eligible for the annual deduction for the tax purposes.
  • 80% exemption from the income tax related to the intellectual property.
  • The property in Cyprus purchased between July 16, 2015 and December 31, 2016 is exempt from the capital gains tax on future disposals (subject to certain conditions).

B. Advantages of Cyprus legal system for the individuals:

  • Individuals who are tax residents of Cyprus are taxed on their income at a progressive rate of 20% to 35% if the income exceeds 19,500 Euro.
  • Individuals who are tax residents of Cyprus and do not have a permanent residence can enjoy a number of the tax benefits:
    • No tax on the dividend income.
    • No tax on the interest income.
    • Rental income: partially exempt (only subject to the normal income tax rates).
      From March 1, 2019 the contributions from the above types of income are paid to GESY (General Health System Fund), while the taxable income does not exceed €180,000 per year.
  • Individuals who are not tax residents of Cyprus are taxed only on certain types of income accrued or derived from the sources in Cyprus at the same rate as the tax residents of Cyprus.
  • Individuals who are not tax residents of Cyprus and are starting to work in Cyprus have the following tax exemptions:
    • Remuneration for any work performed in Cyprus by an individual who was not a Cyprus resident prior to the start of work: 20% exemption (limited by €8,550 per year).
    • For the employment commenced during or after 2012 the exemption applies for 5 years starting from the tax year following the year of the commencement of the employment, with the last eligible tax year being 2020.
  • Individuals with the annual remuneration in Cyprus above €100,000 are granted 50% tax exemption for the period of 10 years if:
    • They were not residents of Cyprus prior to starting work and
    • Started work on January 1, 2012 (exceptions apply).
  • No inheritance tax.
  • Extensive network of the agreements on the avoidance of double taxation.

The advantages listed here are of a general nature, therefore, before taking any action and making decisions, please contact our specialists and describe in detail the situation you are interested in.

Amazon Corporate&Immigration Services will provide you with the consulting and practical assistance related to the taxation in Cyprus.