For more information on Cyprus Investment Immigration, please refer to the Cyprus tax policy: After Cyprus joined the European Union in 2004, it underwent significant reforms in its tax management system, aligning with EU regulations and fully complying with OECD commitments. Overall, Cyprus, with its advantageous geographical location, low tax rates, EU membership, and a developed network of double taxation agreements, has become one of the ideal locations for multinational companies to conduct international tax planning.
The Cyprus tax system mainly includes income tax, special defense tax, value-added tax, capital gains tax, property tax, and stamp duty.
1. Income Tax
Taxable Entities. Cyprus classifies taxable entities into tax residents and non-tax residents. Individuals who stay in Cyprus for more than 183 days in a calendar year are considered personal tax residents; companies that are managed and controlled in Cyprus are regarded as corporate tax residents. Tax residents are liable to pay tax on their worldwide income, including profits, salaries, dividends, interest, discounts, rents, land use fees, and goodwill benefits. Non-tax residents are only taxed on income sourced from within Cyprus, including profits, salaries, pensions, rents, goodwill benefits, and income from professional activities and performances.
2. Special Defense Tax
All tax residents in Cyprus are required to pay the special defense tax.
Tax Refunds. Individuals with an annual income (including interest) not exceeding €11,960 are eligible for a 3% tax refund. Foreign tax credits. If tax has been paid to other countries on income subject to the defense tax, that foreign tax can be deducted from the defense tax payable, regardless of whether a double taxation agreement has been signed with that country.
3. Social Cohesion Fund
The Social Cohesion Fund is contributed by employers at a rate of 2% of employee salaries (with no salary cap).
4. Social Insurance
Salary Cap. For weekly paid employees, the maximum weekly salary is €924, and the maximum annual salary is €48,048. For monthly paid employees, the maximum monthly salary is €4,004, and the maximum annual salary is €48,048.
Salary Floor. For self-employed individuals, the salary used to calculate social insurance must meet the minimum salary standard.
5. Capital Gains Tax
Profits from the disposal of real estate located in Cyprus and profits from the sale of shares in non-listed companies owning real estate in Cyprus are subject to capital gains tax.
Tax Rate and Profit Calculation. The capital gains tax rate is 20% of the net profit from the disposal of real estate. The profit from the disposal of real estate is calculated as the proceeds from the disposal minus the cost of the real estate (or the market value of the real estate as of January 1, 1980, adjusted for inflation, whichever is higher). The inflation rate is calculated based on the official retail price index, which was 35.40 on January 1, 1980 (base year 2005=100).
Exemptions. The following disposals of real estate are exempt from capital gains tax: (1) Transfers of property due to death. (2) Gifts to relatives within three generations. (3) Gifts to companies, provided that the shareholders of the company are family members of the donor and remain family members for five years after the gift. (4) Family companies (where all shareholders are from the same family) gifting real estate received to any shareholder, provided that the asset is held by the recipient for at least three years. (5) Gifts to the state or local government for educational or other charitable purposes or to approved formal charities. (6) Exchanges and sales conducted under the Agricultural Land Law. (7) Exchanges of real estate based on equivalence principles. (8) Profits from the disposal of shares in listed companies. (9) Profits from the transfer of real estate or shares in the case of restructuring.
Individuals selling real estate with income below the following amounts are exempt from tax: (1) Sale of a primary residence, €85,430. (2) Farmers selling agricultural land, €25,629. (3) Sale of other real estate, €17,086.
6. Property Tax
Cyprus levies property tax on property owners (including individuals and legal entities) annually on January 1, payable by September 30. The tax value is calculated based on the market value of the property as of January 1, 1980. The tax rates are as follows:
7. Land Registration Fees
Mortgage Fee Rate. The land mortgage transfer fee rate is 1% of the mortgage amount.
8. Stamp Duty
Cyprus imposes stamp duty on various documents signed in economic activities, including receipts, contracts, company registration certificates, and stock issuance certificates.
Receipt Stamp Duty. Taxable at 3 cents for amounts between €3-34; taxable at 7 cents for amounts over €34.
Contract Stamp Duty. For amounts up to €170,860, a rate of 1.5‰ is applied; for amounts over €170,860, a rate of 2‰ plus €256 is applied; the maximum tax limit is €17,086; non-fixed contracts are taxed at €34.
Limited Liability Company Registration Stamp Duty. A fixed fee of €103 plus 6‰ of the registered capital.
Limited Company Stock Issuance Stamp Duty. €17.
Exemption Conditions: Transactions conducted due to company restructuring are exempt from stamp duty.
9. Special Tax on Securities Transactions
From January 1, 2008, to December 31, 2009, all securities transactions are subject to a special tax on securities transactions. This tax is paid by the seller of the securities and is collected by the Cyprus Stock Exchange and remitted to the state. The tax rate for both individuals and legal entities is 0.15%.
Exemption Conditions: (1) Securities issued and repurchased by the issuer. (2) Non-convertible corporate bond transactions. (3) Transactions involving credit bonds, development shares, and government securities. (4) Gifts of securities between parents and children or between spouses or relatives within three generations. (5) Transfers of securities due to death.
10. Value-Added Tax
Sales of goods, provision of services, and imports from third countries outside the EU within Cyprus are subject to value-added tax.
The tax rates are as follows: (1) Exports, provision of food, medicines, and vaccines, import/export trade commissions, international air and sea passenger transport, freight and related services (excluding goods transport within the EU), shipping management services, imports, temporary imports, transshipment or transit goods placed in customs warehouses, bonded warehouses, and free zones, and goods that have been imported but not yet cleared, all at a rate of 0%.
(2) Provision of animal feed, including fish and bird food, provision of fertilizers, provision of coffins, provision of services, road cleaning services, garbage collection and disposal (excluding services provided by local governments), services provided by writers, composers, and artists, hairdressing services, improvements and repairs for private residences, provision of water, juice products, and beverages (excluding energy drinks, alcoholic beverages, beer, and wine), provision of liquefied petroleum gas, newspapers, books, magazines, and similar items, various goods provided to persons with disabilities, provision of ice cream, chips, and salted nuts, provision of medicines and vaccines at rates other than 0%, urban and rural public transport services, and catering services provided by school canteens, all at a rate of 5%.
(3) Taxi passenger transport and luggage transport, food provided by restaurants and other catering services (excluding alcoholic beverages and food provided by school canteens), hotel accommodation, all at a rate of 8%.
(4) All goods and services not covered by the above three tax rates are taxed at a rate of 15%.
Exemption Conditions: (1) Rent; (2) Provision of real estate (excluding new constructions); (3) Insurance and financial services; (4) Medical services; (5) Educational services.
Value-Added Tax Registration. Value-added tax taxpayers must register for value-added tax. (1) If the taxable amount of value-added tax exceeds €15,600 at the end of the last month of a tax year, registration must be completed by the end of that month. (2) Registration can be done at any time if it can be reasonably expected that the taxable amount of value-added tax will exceed €15,600 in the next 30 days. For businesses with a turnover below €15,600, voluntary registration for value-added tax is available.
Businesses with a permanent establishment or residence in Cyprus but providing goods or services that should be subject to value-added tax within Cyprus from outside Cyprus can voluntarily register for value-added tax for those activities.
Non-recoverable Taxes. (1) Personal entertainment expenses of non-employees; (2) Purchase of private cars with a maximum of 9 seats.
