The tax system in Cyprus, thanks to its political stability and numerous reliefs, attracts both individuals and businesses. See how taxation works in Cyprus.
Table of Contents
- Tax system in Cyprus – the Legal and Administrative System of Cyprus
- Tax system in Cyprus – Taxation of Natural Persons
- Tax system in Cyprus – Tax Residency in Cyprus
- Tax system in Cyprus – Capital Gains, Dividends, and Investment Income
- Tax system in Cyprus – Corporate Taxation
- Tax system in Cyprus – Summary
- FAQ – Tax system in Cyprus
Tax system in Cyprus – the Legal and Administrative System of Cyprus
The political system of Cyprus is a presidential republic. Its legal system is based on Anglo-Saxon law. For entrepreneurs, this means transparency of regulations and ease of conducting business. Especially in international contexts.
The country consists of six districts: Nicosia, Limassol, Larnaca, Paphos, Famagusta, and Kyrenia. Key business decisions are made at the central level, which reduces administrative barriers.
Transparent procedures and flexible regulations make Cyprus an ideal place to set up holding companies and trust structures that support tax optimization. Learn more about how a Cyprus company can benefit from low taxes and a favourable legal system.
Tax system in Cyprus – Taxation of Natural Persons
Cyprus offers a progressive personal income tax system. It means that the amount of tax depends on your annual income. In 2024, the tax-free amount is 19 500 EUR. People with lower incomes are not fiscally burdened.
PIT rates in Cyprus:
| Annual income | Tax rate |
| Up to 19 500 EUR | 0% |
| 19 501 EUR – 28 000 EUR | 20% |
| 28 001 EUR – 36 300 EUR | 25% |
| 36 301 – 60 000 EUR | 30% |
| Over 60 000 EUR | 35% |
Taxes in Cyprus apply to the global income of tax residents and income earned in the territory of the country by non-residents. This includes salaries, business income, rental income, investment returns, and certain capital gains. Numerous exemptions and tax incentives significantly lower the effective tax rate.
Cyprus Tax Reliefs:
- 50% tax exemption. It is available to individuals relocating their tax residency to Cyprus with annual income exceeding 100 000 €. It is valid for 17 years.
- 20% tax exemption. It is available for individuals earning below 100 000 €, with a maximum deduction of 8 550 € per year.
Tax system in Cyprus – Tax Residency in Cyprus
Obtaining tax residency in Cyprus is possible based on two main criteria:
- 183 days rule. It applies to those who stay in Cyprus for at least 183 days in a tax year.
- 60 days rule. It applies to individuals who stay in Cyprus for at least 60 days in a tax year, run a business, work, or own property in Cyprus, and at the same time do not stay longer than 183 days, and are not tax residents in another country.
Thanks to these rules, taxes in Cyprus attract both entrepreneurs and freelancers.
Tax system in Cyprus – Capital Gains, Dividends, and Investment Income
Cyprus offers attractive solutions for individual investors and capital market participants. Below we present Cyprus’s taxation rules for capital gains, dividends, and investment income.
| Capital gains: | |
| Profits from the sale of real estate located in Cyprus | Gains from the sale of shares, bonds, and other financial instruments |
| – Are taxed at the rate of 20% – Taxable income is the difference between the sale price and the costs of acquisition and improvement of the property – Additional reliefs are possible | – Are exempt from taxation if the company that sells the shares does not have significant assets in real estate in Cyprus – This exemption makes Cyprus an attractive jurisdiction for those actively trading securities |
| Dividend income: | |
| Non-Domiciled Individuals | Domiciled Individuals |
| – Dividends are fully exempt from taxation. – The exemption applies to dividends paid by both Cypriot and foreign companies. – The exemption includes the absence of the Special Defence Contribution (SDC), which is 17% for residents with domicile in Cyprus. | – Dividends are subject to SDC at the rate of 17% – Dividends received from abroad may be exempt from SDC if the recipient owns at least 50% of the shares in the company paying the dividend and this company has been taxed in the country of its registered office |
| Interest income: | |
| Non-Domiciled Individuals | Domiciled Individuals |
| – Interest is completely exempt from taxation. This makes Cyprus attractive for investors who profit from bank deposits and bonds. | – Interest is subject to SDC at 30% – Exemptions may apply to interest on certain financial instruments |
Tax system in Cyprus – Corporate Taxation
Cypriot legislation offers one of the lowest corporate income taxes in Europe. The CIT rate amounts to 12.5%. Taxation applies to net profits of companies with tax residency in Cyprus. This applies regardless of whether the income is earned locally or abroad.
CIT taxation – basic rules:
- Operating income: 12.5%;
- Dividends received by companies residing in Cyprus are generally exempt from CIT;
- The sale of shares in companies incorporated outside Cyprus is exempt from taxation. The only condition is that the companies do not own significant real estate in Cyprus.
Tax reliefs and exemptions in Cyprus:
- Relief for R+D activities. An additional 20% deduction on qualified research and development expenses;
- Relief for investments in green energy. Tax exemptions for companies investing in renewable technologies and energy efficiency projects;
- New Investor Relief. New investors enjoy a 50% exemption for 3 years if they hire at least 10 employees and invest in the local economy.
Tax system in Cyprus – Summary
Cyprus stands out as a tax-friendly jurisdiction. This is the result of low CIT rates, progressive PIT with a high tax-free threshold, and various tax exemptions. Flexible tax residency rules make Cyprus attractive for businesses and wealth management.
Are you considering relocating your business or tax residency to Cyprus? Contact us today for expert support with company formation and tax optimization!
FAQ – Tax system in Cyprus
What are the CIT rates in Cyprus?
The corporate income tax rate is 12.5%.
Are dividends taxable in Cyprus?
Non-domiciled individuals are exempt from dividend tax.
How to get tax residency in Cyprus?
You can use the 183-day or 60-day rule if you meet certain criteria.
What are the PIT rates in Cyprus?
PIT rates range from 0% to 35% depending on income.
Are capital gains taxed in Cyprus?
Most capital gains, such as the sale of stocks, are exempt from tax.
What is a non-domiciled status?
Non-domiciled people do not pay tax on dividends, interest, and most investment income.
What tax benefits apply to new residents?
50% tax relief for people with incomes exceeding €100,000.
Do companies have to pay withholding taxes?
Cyprus does not impose withholding taxes on dividends, interest or royalties.
Is income from real estate taxed?
Income from renting real estate is subject to progressive PIT, with the possibility of deductions.
What are the benefits of starting a business in Cyprus?
Cyprus offers low taxes, numerous exemptions, and a stable business environment.