(a)Permanent Residents
An individual who spends at least 183 days in Cyprus in the tax year will be considered to be a Cyprus resident for tax purposes. These are people who:
- Either they settle permanently in Cyprus upon retirement.
- Or are foreigners who live indefinitely or for a fixed period of time in Cyprus are employees. Either of their own International Businesses (Offshore Company) or of a local or offshore firm, and who chose to purchase their own property in Cyprus rather than live in rented premises.
- Or are business people who wish to take advantage of the tax and other fiscal advantages offered when having Cyprus tax residency.
A series of incentives is given by the Cyprus Government to these people, including very low taxation of their income which emanates from abroad.
Individuals are taxed in Cyprus on the Following Types of Income
- Profits from a business activity in Cyprus, including rent etc. from property. Profits earned from a permanent establishment abroad, are fully exempt from corporation tax.
- Worldwide employment income.
- Pensions in respect of past employment exercised in Cyprus.
- Pensions exercised outside Cyprus will be taxed either at normal income tax rates as shown on the following table, or at the option of the taxpayer, at the flat rate of 5% on the excess of CYP 2,000.
| Income Tax Rates Applicable From 2004 | Rate |
| Up to: CYP 10,000 | Nil |
| From: CYP 10,001 - 15,000 | 20% |
| From: CYP 15,001 - 20,000 | 25% |
| Above: CYP 20,000 | 30% |
Click here to go back
Deductions and Allowances
The following can be deducted in calculating the tax liability:
- There will be a deduction of 20% for the first 3 years in Cyprus, limited to CYP 5,000 per annum.
- Life assurance premiums
- Contributions to stale social security and welfare fund and pension funds
Expatriate Tax and Social Security Contributions
Expatriate employees are taxed as follows:
- Individuals who perform all their employment duties abroad will not be taxed on their earnings.
- Those who are present for 183 days or more in Cyprus in the tax year will be taxed on their worldwide earnings.
- Those who are present for less than 183 days in Cyprus in the tax year will be taxed on their earnings attributed to their days work in Cyprus.
- Individuals who originate from countries (including E.U. countries until such time that Cyprus becomes a full E.U. member) where a social security agreement has not been signed between their country and Cyprus, will be liable to social security contributions. UK citizens can opt out for a period of three years, as relevant agreement has been signed between the two countries.
Contributions are Currently Payable by Both Employer and Employees, at the Rate of 6.3%
Individuals are not taxed in Cyprus on interest or dividends received from sources either within Cyprus or from abroad, except for Defence Fund Contribution as explained below.
Defence Fund Contributions are Payable in the Following Cases
- 10% tax charge on interest from investments in Cyprus or abroad.
- 3% tax charged on 75% of the gross rental income from real property, wherever it is located.
- 15% tax charged on dividends received from both Cypriot and non-Cypriot companies.
- Relief in the form of tax credit, is given for any foreign taxes paid on the above.
Click here to go back
Gains from Disposal of Securities
Any gains made from the disposal of securities are not subject to taxation in Cyprus. The exemption applies for all gains, including those that arise from trading in securities.
Double Tax Treaty
It is the policy of the Cyprus Government to encourage tax incentives for foreigners in order to develop Cyprus as a financial centre in its area, without proclaiming or promoting itself as a tax haven. Individuals or companies who choose to reside in Cyprus may also enjoy, under certain circumstances, the benefits of the Double Taxation Treaty of their country of origin with Cyprus, if there is one in place. The main objective of the Double Tax Treaty is to avoid the double taxation of income earned in any of the two contracting countries.
Cyprus has signed 32 such treaties, in effect regulating tax regulations with over 40 countries. For example, United Kingdom citizens may take advantage of the Double Taxation Treaty between the U.K. and Cyprus. This enables you to receive your pensions and investment income in Cyprus free of U.K. withholding tax. This Treaty is unique to Cyprus, since it includes both public and private sector pensions.
Insurance pensions can be paid to retirees in Cyprus on a similar tax-free basis, and are index-linked by virtue of the Reciprocal Agreement, compared to their "frozen" status in other overseas destinations.
(b) Non Residents
These are people who:
- Either are holiday makers who purchase properties in Cyprus as holiday homes or for possible permanent living upon retirement, or for the sale thereof with a reasonable profit at a later stage.
- Are Business investors and companies who acquire property in Cyprus for tourist or industrial purposes, making use of the location and climate of Cyprus, the excellent infrastructure and the various incentives offered for these purposes, especially in the area of taxation.
Individuals are Taxed in Cyprus on the Following Types of Income
- Employment income for work performed in Cyprus
- Profits from a business activity, which is carried out through a permanent establishment in Cyprus.
- Pensions in respect of employment exercised in Cyprus, except for pensions paid from a fund established by the Cypriot Government or any local authority.
Click here to go back
