Taxation Cyprus – An in-depth view

Cyprus is well-known for its advantageous tax system and for being a center for global commerce. In order to draw in foreign investors, Cyprus provides low tax rates, a comprehensive network of tax treaties, and other benefits. This article will examine Cyprus’s tax system in detail, looking at its various tax rates, tax incentives, and tax forms. Read here everything you need to know of you consider to register a company in Cyprus or useful information if you already have.

Taxation Cyprus: 4 Types

Businesses and individuals in Cyprus are required to pay a variety of taxes.

Among them are:

1. Corporate Income Tax: Regardless of a company’s location, this tax is levied on its profits when it operates in Cyprus. Cyprus has one of the lowest standard rates of corporate income tax in Europe, at 12.5%. Companies can lower their taxable income by taking advantage of specific exclusions and deductions.
2. Personal Income Tax: Residents of Cyprus are subject to this tax on their income. Higher earners in Cyprus pay a larger proportion of their income in taxes due to the progressive nature of the personal income tax rates. In Cyprus, the highest personal income tax rate is 35%.
3. Value Added Tax (VAT): In Cyprus, sales of goods and services are subject to this tax. Cyprus has a typical 19% VAT rate, although for some goods and services, there are lower rates of 5% and 9%. Read here, how the VAT registration in Cyprus works.
4. Capital Gains Tax: The profit from the sale of assets, including real estate, stocks, and shares, is subject to this tax. Cyprus has a 20% capital gains tax rate, but there are a number of exclusions and deductions that apply.
5. Property Taxes: In Cyprus, there are various property taxes, such as capital transfer tax, municipal taxes, and stamp duty.

Taxes on Corporate Income in Cyprus

Cyprus tax-resident companies are taxed on their income from all sources in the country and abroad. The standard corporate income tax, or CIT, is 12.5%. Non-Cyprus tax resident companies are exempt from CIT tax.

Value-Added Tax Rates

Value-added tax, or VAT, is levied on the importation of products into Cyprus, the sale of goods from the EU, and the provision of services and goods within the country. 19% is the standard rate of VAT.

Personal Income Tax Rates

Residents of Cyprus subject to taxation are required to pay general and foreign taxes on their worldwide income at rates that vary from 20 to 35 percent, based on their yearly income. If your taxable income is €19,500 or less per year, you are not required to pay this tax.

Here is a table of the personal income tax tiers in Cyprus:

Cyprus has a special pension framework for pensioners, with a 5% tax rate on pension payments over €3,420 monthly. Capital gains from the sale of securities and corporate rights, interest income, and dividends are all subject to the Defense Tax, also known as the Special Tax Contribution for Defense Purposes. The non-domicile tax inhabitants are not required to pay this tax.

60 days – A foreigner can stay in Cyprus to be a tax resident

The 60-day for Cyprus tax residency rule provides for five requirements:

• Do not reside in any other country longer than 183 days.
• Not to be a tax resident of other states during the tax period.
• To carry out any activity in Cyprus, for example, to have a job in Cypriot companies. 
• Own or rent residential real estate in Cyprus.
• Stay for at least 60 days in Cyprus.

Cyprus offers great tax perks and policies to both its residents and foreigners. Foreigners who invest in real estate or finances might acquire permanent Cyprus residency and become tax residents.

A non-tax resident is solely subject to taxation on income received from sources within Cyprus. When a corporation is run or controlled out of Cyprus, it may be regarded as a tax resident.

Special Contribution to Defense

The Defense Tax, or Special Tax Contribution for Defense Purposes, consists of three parts:

• A tax on dividends received in Cyprus and abroad.
• A tax that consists of interest income earned in Cyprus and abroad.
• Capital gains from the sale of securities and corporate rights.

A non-domicile tax resident is exempt from paying defense tax.

Taxation Cyprus: exemptions for Non-Cyprus residents 

Non-residents can take advantage of a number of exemptions and benefits offered by Cyprus’ tax system, including those related to capital gains, employment income, VAT exemptions, and many other areas.In addition,

For instance, the full amount of interest, dividends, and royalties are free from taxation for non-Cyprus residents. Additionally, non-residents are not subject to income taxes on capital gains accruing to people from the sale of securities or payments made to authorised funds.

You can check a tax calendar to pay all taxes on time, be up-to-date, and avoid paying unnecessary penalties.

Date Requirements:

Valid double taxation treaties

Cyprus has double taxation agreements with over 50 nations. While a tax treaty with the United States is also tailored to the US Agreements, the majority of these nations adhere to the OECD Model Convention.

Complete list of countries that have double taxation with Cyprus:

Conclusion

In conclusion, Cyprus provides low tax rates, exemptions, and incentives for both individuals and corporations, making it an advantageous tax regime. There are unambiguous guidelines for becoming a tax resident, and the tax system is simple to understand. It is now simpler for foreigners to become tax residents of Cyprus thanks to the 60-day rule.

Tax Benefits for Businesses in Cyprus

Cyprus offers one of the most competitive tax environments in Europe, making it an attractive destination for businesses looking to expand or establish operations. With its low corporate tax rate, tax-efficient business structures, and numerous exemptions, companies can optimize their tax planning while benefiting from EU market access.

Key Tax Benefits for Businesses in Cyprus:

• Low Corporate Tax Rate (12.5%)
  Cyprus has one of the lowest corporate tax rates in the EU, allowing businesses to maximize profits while remaining compliant with international tax regulations.
• Intellectual Property (IP) Box Regime – Effective Tax Rate of 2.5%
  Companies generating income from intellectual property (IP) assets, such as patents or software, can benefit from an effective tax rate as low as 2.5%, significantly reducing their tax burden.
• No Withholding Tax on Dividends, Interest, or Royalties
  Unlike many other jurisdictions, Cyprus does not impose withholding tax on payments of dividends, interest, or royalties to non-residents, making it an excellent hub for international business operations.
• Tax-Free Reorganizations
  Mergers, acquisitions, and corporate restructurings are exempt from taxation, allowing businesses to grow and restructure efficiently without incurring unnecessary tax liabilities.
• Group Relief for Corporate Tax Losses
  A company’s tax losses can be offset against the profits of another company within the same group, optimizing the overall tax position of businesses with multiple entities in Cyprus.
• Favorable Tonnage Tax System for Shipping Companies
  Cyprus is a global maritime hub, offering a unique tonnage tax system that significantly reduces the tax burden for shipping companies operating under the Cypriot flag.
• No Capital Gains Tax on the Sale of Shares
  Profits from the sale of shares, bonds, and other securities are exempt from capital gains tax, making Cyprus a strategic location for holding companies and investment firms.