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Complete Guide on: Cyprus Investment 2020

This is a complete guide to Cyprus Investment in 2020.

In this new guide you’ll learn:

  • Tax and Legal systems
  • Market and Economy Analysis
  • How to progress with Real Estate Investment in Cyprus
  • Lots more

Let’s get started.

Chapter 1: Cyprus and the Investment Landscape

In this chapter we’re going to show you why investment in Cyprus is an ideal choice.

We’ll be showing you some of the key facts and figures regarding the landscape of the island. 

Overview of Cyprus

Cyprus is the third largest island in the breathtaking Mediterranean region. Statistics obtained in 2020 reveal that with a 1.21 million population, it is the third most populated Mediterranean island, and stands 158th in the world ranking. Over the years, Cyprus has attracted expats from all over the world, and today, it hosts around 110,000 foreign permanent residents.

Cyprus enjoys a rich and fascinating history, coated with Greek mythology. Mythological archives reveal that Cyprus s the birthplace of the Greek goddess Aphrodite, the goddess of love and beauty. The island has ancient roots that can be traced back to over 11000 years. In 1960, the island became an independent republic, and its dynamic geostrategic location in northeastern Mediterranean allows it to act as a gateway to increase connectivity.

Cyprus has always been regarded as a gateway between great civilizations, and its geostrategic location has always allowed the island to maintain an influential presence throughout history. The island attracts tourists and expats with its pleasant tropical climate. The summers are typically dry and winters are mild, while the sun shines bright for around 300 days of the year. The months between November and March make up the rainy season, while January is the coldest month, and August is the hottest month of the year.

Understanding Cyprus: Population, Infrastructure and More

Presently, the population of Nicosia is estimated at 200,452, Limassol at 154,000, Larnaca at 72,000, Famagusta 42,526, and Paphos, the least populated city hosts 35,961. All the cities are ideal for investment in Cyprus for their own reasons. 

Nicosia is the largest city and the capital of the island, alongside being a hub of commercial and political activity in Cyprus. Famagusta is known as the entertainment hub and prime tourist attraction, while Limassol offers a cosmopolitan living experience. Larnaca hosts the primary airport of Cyprus, alongside a marina and port.

The official language of the island is Greek, however, English is commonly spoken. Around 73% of the locals fluently speak English, while the street signs, advertisements and other directions are all in English, which is also the major corporate language. Other languages spoken across the island include German, Russia and Swedish.

Cyprus is a democratic nation, and the President is both, the head of the government and the state. He is directly elected to serve a five-year term, while the members of the House of Representative exercise legislative authority, and are elected by Cypriots after 5 years. The Judiciary is an independently functioning body tasked with the responsibility to dispense justice, while the President elects the members of the Cyprus Supreme Court.

There are no rail networks on the island, but Cyprus boosts superior quality road infrastructure, and has a higher ranking than the United Kingdom. It is also home to two multi-purpose deep sea ports. The deep sea port located in Limassol serves both, freight cargo and passengers. It has facilitated the corporate ecosystem by offering cost-efficient logistics solutions and an advanced infrastructure to facilitate transport.

Larnaca and Paphos host two state-of-the-art international airports that accommodate over 10 million visitors each year. These airports connect Cyprus with all the major transit and tourist hubs across the world, including Dubai, London, Moscow, Vienna and Athens. If you’re considering making an investment in Cyprus from abroad then this is particularly pleasing news for you.

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Why Choose Cyprus?

Cyprus is an excellent location for both, residential relocation and corporate relocation.

Strategic Location
Situated at the crossroads of Europe, Asia and Africa, this island acts as a gateway that connects continents and regions, making investment in Cyprus ideal. It is centrally located in the Mediterranean and enjoys easy access to all the major shipping and air routes controlled across the three continents. Cyrpus enjoys close proximity with multiple countries, including Turkey, Greece, Syria, Israel and Egypt.

A Healthy Economy
Cyprus is one of the most rapidly growing and advancing economy in the European Union. It boosts a positive macroeconomic standing, and offers a wide array of benefits to businesses, talented professionals and investors.

Attractive Tax Exemptions
Cypriots and foreign settlers enjoy a wide array of tax exemptions and benefits. The corporate income tax rate is as low as 12.5%, and Cyprus does not charge any taxation for capital gains. Citizens enjoy access to a wide range of EU directives, and the island shares an extensive double tax treaty network with more than 60 countries across the world.

High Living Standards
Cyprus boosts higher standards of living while the costs of living remain strikingly low. Cypriots enjoy easy access to wide array of modern amenities and facilities at surprisingly low costs. It ranks as the 37th country in the world on the life quality index.

Member of the European Union
On 1st May, 2004, Cyprus officially became a member of the European Union, and a member of the Economic and Monetary Union. In 2008, the island joined the Eurozone, and the Euro became its national currency. As the Eastern outpost of the European Union, Cyrpus offers a wide array of competitive advantages to businesses and investors as the intersection of major transport and communication hubs that connect three continents. It allows European businesses a secure and strategic gateway to access the entire region.

Talent Acquisition Pool
Cyrpus allows businesses to acquire talent from a wide pool of highly skilled and well-educated professionals. It boosts the youngest workforce population across the EU with a praiseworthy private and public education sector. 55% of the Cypriot workforce boosts a tertiary degree.

Efficient Legal Regulation
Cyrpus boosts an efficient and business-friendly legal regulatory structure that offers stronger protection for intellectual property and investment. The legal system of the island is based on the English common law.

Chapter 2: Living in Cyprus

This chapter will cover all the basic information you need to know about living on this island.

We’ll explain everything, from the lifestyle, to the education infrastucture and more. 

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Lifestyles & Safety

Cyprus offers an idyllic lifestyle surrounded by breathtaking natural beauty, a clean environment, pleasant tropical climate and modern living standards. The island is a treasure trove of natural and cultural beauty, and a fascinating historical heritage. The island boosts a wide array of lucrative professional and employment opportunities, while the culture of hospitality makes is easier for foreigners and expats to adjust after relocation.

The island is one of the most secure locations across the EU, with a wide array of comprehensive security standards. Cyprus ranks 21st across the world in terms of its national police, and 22nd in terms of theft reduction and control. The crime rates are extremely low with very few instances of thefts and burglaries. The island is one of the safest destinations for families with children and elderly retirees.

Healthcare Infrastructure

Cyprus offers its citizens a robust, state of the art infrastructure powered with technological advancements and research-driven innovation. The island is home to six cutting-edge public general hospitals, a state of the art oncology center and over 70 private clinics and hospitals.

The island has undertaken ambitious reforms and pragmatic investments to transform the healthcare sector. Under the new National Health Insurance System, Cyprus is making great strides towards making the healthcare infrastructure more affordable and efficient. The healthcare sector of the island is ripe with a wide array of lucrative investments to enhance healthcare delivery, establish e-health infrastructure and undermine fiscal risks.

The Cypriot healthcare reforms have made immense progress. The quality of IT infrastructure and professional training has increased, and healthcare providers are being trained to deliver enhanced communications, support and treatments. Specialized care is all set to emerge as one of the greatest milestones in Cyprus’ ambition for healthcare reforms.

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Cultural Heritage

Cyprus enjoys a rich and vibrant cultural heritage, and it hosts hundreds of archaeological sites that take us back in ancient times. The evolution of the island can be traced through various historical eras and periods. Nicosia, once the ancient city of Lefkosia, alone hosts more than 17 museums that offer a broad spectrum of enthralling cultural artefacts and archaeological remains.

The breathtaking natural heritage of Cyprus certainly deserves more than a mention. It allows locals and visitors to enjoy hundreds of scenic destinations, golden sandy beaches, crystal blue waters, unlimited sunshine and unique flora and fauna.

Education Infrastructure

The Cypriot education system is highly advanced, and the island hosts a wide array of well-reputed institutions. Cyprus boosts more than 20 highly reputed English-medium primary and secondary schools. It also hosts internationally-recognized universities, colleges and training centers.

As per the Europe 2020 education reviews, Cyprus has demonstrated a commendable performance in achieving its targets to improve education delivery and enhance basic skills. The school dropout rate has declined significantly, while the territory education and skill-building has witnessed considerable improvements. Cyprus happens to boost the second highest tertiary educational attainment rate across the EU at 57.1%

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Abundance of Entertainment Opportunities

Cyprus is an entertainment hub that offers an excess of exciting recreational opportunities that appeal to every taste. Outdoor enthusiasts, history buffs, food enthusiasts and nightlife lovers-everyone has access to an abundance of entertainment opportunities. The state of the art modern and ancient open-air amphitheaters host exciting concerts by international performs, cultural events, local festivals and more.

The island hosts a wide array of international film festivals, yearly classical music festivals, opera festivals and much more. Cities across the island are laden with an abundance of fine dining establishments, restaurants, bars, cafes, and hip clubs that offer an exciting nightlife experience. The natural beauty of the island presents outdoor enthusiasts with countless opportunities for water sports, hiking, and much more.

Chapter 3: Cyprus Market and Economy Analysis

Investment opportunities in Cyprus extend across various sectors. 

Find out what these sectors are and read an in depth analysis of them in this chapter. 

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Overview of The Market

There are  an abundance of lucrative opportunities for investment in Cyprus that extend across various sectors, including tourism, shopping, real estate, energy and more. These sectors serve as the foundation of the island’s flourishing economy. Cyprus continues to make prime investments towards expanding other industries, including the filming industry, funds and technological innovation.

Investing in Cyprus: Advantages & Risks

Cyprus has rapidly emerged as one of the top destinations that attract foreign investments. In recent years, the island has undergone rapid economic transformations, which has given birth to a sustainable and lucrative corporate ecosystem.

Advantages:
Cyprus offers a stable and flourishing economy that is supported by positive forecasts of sustainable growth.

It attracts businesses with a corporate-friendly and dynamic ecosystem, supported by one of the lowest corporate tax rates across the EU: 12.5%.

The corporate sector is facilitated with a robust transportation and communications infrastructure, while the ports sector offers cost-effective logistics solutions.

Some of the well-developed sectors of Cyprus include tourism, foreign businesses, maritime transportation and financial services.

Risks:
The island boosts a population less than 1 million, which creates a weaker internal market.

The island also boosts a some external debt, associated with the bank deposits.

The influence of the 2009 financial crisis is still visible in the weakness of the Cypriot banking sectors. 

Sectors that Power the Cypriot Economy

Energy & Renewable Sector

Cyprus boosts a rapidly growing and expanding gas and oil sector, which offers a wide array of lucrative opportunities for rapid investment. The Exclusive Economic Zone (EEZ) of the island has transformed after the discovery of massive natural gas reserves. The geostrategic location of Cyprus allows it offer a dynamic location that enjoys easy access to major transit and communication routes, alongside acting as an integral fuel hub.

Tourism

The tourism and hospitality sector is indeed the most vibrant and dynamic sections of the Cypriot economy. It powers a massive chunk of the country’s GDP as the island is brimming with an abundance of natural beauty and historical fascination. Tourism has rapidly emerged as the most dynamic and sustainable commercial sector, and the island is focused on the development of cultural heritage, rural sites, sports and wedding tourism, among others.

Presently, investment in Cyprus is one of the most lucrative destinations for investment in tourism real estate and infrastructure.

Real Estate

The Cypriot real estate market is one of the most flourishing sectors that boost the island’s economy. The housing market has made a recovery over the years, and sales continue to rise in the wake of increased foreign demand. Foreign residents and expats seek to invest in modern and luxury residential properties across the major cities and scenic destinations of the island.

Luxury villas, coastal residential projects, and high-end apartments have emerged as the major feature of the Cypriot housing market. Foreigners also seek to establish second homes as the island has become a major holiday destination in recent years.

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Alternative investment funds (AIFS)

The AIFs, governed by the Alternative Investment Funds Law, is another lucrative industry sector that offers a wide array of lucrative investment and employment opportunities.

Shipping

Thanks to its strategic location, Cyprus is an instrumental international shipping hub, and the shipping industry boosts some of the major global players in the industry. The EU-approved “open registry” regime has allowed Cyprus to make great strides towards expanding and developing its shipping sector. With over 1,000 vessels in its arsenal, Cyprus boosts the 10th largest merchant fleet in the world. It offers businesses the benefits of an attractive shipping taxation regime.

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Research, Startups & SMEs

In recent years, Cyprus has dedicated considerable resources towards research and technological advancement. In 2019, the Cypriot government undertook a decision to double its investment in technological research with an agenda to “Innovate Cyprus”. This has created the ideal ecosystem to encourage, expand and support entrepreneurship, technological innovation, research-drive excellence and scientific inquiry.

The government has allocated grants and funds to finance four new research centers, alongside facilitating financial incentives to support startups and SMEs. The competitive and corporate-friendly ecosystem of Cyprus attracts innovators and entrepreneurs who seek to enjoy easy access to the markets across the EU.

Films & Entertainment

Under its recent incentive scheme, the Cypriot government seeks to encourage international productions and boost the local films and entertainment industry. Foreign producers are attracted by the many tax exemptions and cost-efficient benefits offered by the island, alongside access to a wide array of scenic destinations.
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Chapter 4: Real Estate Investment Guide for Cyprus 2020

In this chapter we will give you all the necessary information regarding renting, selling, buying and constructing a property in Cyprus.

We will also show you the most recent figures relating to real estate. 

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The Cypriot Real Estate Market

The real estate landscape of Cyprus is ripe with investments, and the housing sectors continue to dominate the ecosystem. Under the lucrative investor citizenship scheme, introduced in 2015, Cyprus has welcomed immense growth in its residential real estate sector. In 2018, the residential construction activity on the island increased by a striking 37.7%.

The real estate industry is a major contributor to the Cypriot economy, and aside from investments, it has also created a wide pool for employment opportunities for the construction and other sectors. In recent years, the island has welcomed an increased demand for high-end apartments, luxury villas, residential schemes and modern neighborhoods. Much of this demand is tied with foreign investment and the tourism industry.

Purchasing a Property in Cyprus

Purchasing a property in Cyprus comes with a wide array of advantages and tax exemptions for local and foreign investors. The economic climate encourages home-ownership, and aside from the sales price, there are several other costs that buyers need to take into account.


These costs include:

  • Land registry fees
  • legal fees
  • Local property tax
  • Property transfer fees
  • Stamp duties
  • Value added tax
  • Real estate agent's fee
  • Property insurance

Renting a Property in Cyprus

The island enjoys a diverse and facilitative rental market, and in 2019, rental prices have experienced an increment of 3.4% as demand continues to rise. Rental properties that were constructed before 2000 are subject to the rental control regime that caps rental increments. Rental properties constructed after 2000, are subject to different conditions.

The price valuations of these properties is conducted on the basis of the affordability gap, dividend gap, and estimations of home prices justified by the forces of demand and supply in the housing market.

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Selling a Property in Cyprus

There are various mediums to sell a property in Cyprus. Owners can organize the sale themselves, but it is highly advisable to hire a realtor as the commission rates are typically 3% of the final sale price. It is ideal to interview various agents and examine their listing methods and marketing strategies before finalizing the ideal candidate.

There are countless listing portals and digital platforms that help sellers promote their listings and attract potential buyers from all over the world.

Constructing a Property in Cyprus

In recent years, the Cyprus construction industry has entered a new age of growth, expansion and development. Countless new projects and developments are being initiated across the island, as Cyprus continues to reform and innovate its construction ecosystem to facilitate construction firms, developers and investors.

The Cypriot government has made great strides in offering incentives to developers to undertake its mission of the new “Affordable Housing” scheme. The construction industry is expanding and growth as a result of the increase in increments and support provided to developers. During the months between January and September 2019, a total of 5,201 building permits were authorized, while the construction industry contributed €1.52 billion to the GDP.

The residential sector is expanding at a healthy pace, and in 2019 alone, the number of new home constructions has increased by a whopping 52.6%. Limassol has welcomed the construction of 2,796 homes, 2,070 in Nicosia, 900 in Larnaca and 851 in Paphos.

If you seek to build, repair, renovate, construct, extend or demolish any building or structure in Cyprus, you will have to obtain a town planning permit from the relevant authority. You will be required to submit an application for a building permit to the relevant authority, depending on the location of your property.

In certain cases, property owners are required to provide specialized study along with their applications. These include electrological study, mechanical study, static study, energy performance reviews and others. The authorities will then conduct an on-site inspection of the property and its surrounding area to rule out safety and health hazards.

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Chapter 5: Investment Immigration Laws

This chapter will cover all the basic information you’ll need regarding immigration laws.

We will explain permanent residency, work permits and citizenship concerning Cyprus. 

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Permanent Residency in Cyprus

In order to acquire permanent residency in Cyprus, property must be purchased on the island. The applicant could purchase the property alone, with their spouse, or as a Cyprus-based company. The property in question cannot be a resale, it must be a newly constructed property with the Developer as the sole vendor.

The purchase price of the property must be at least €300,000 excluding VAT, and a minimum of €200,000 excluding VAT must be paid. The applicant must provide substantial proof of the foreign money transfer of this amount. A contract of sale has to be deposited at the Department of Lands and Surveys.

The applicant will be required to make a bank deposit worth €30,000 in a Cypriot bank, which should be blocked for at least 3 years. The money must be transferred from abroad with substantial proof.

The applicant will also have to prove funds worth €30,000, and an additional €5,000 for each individual dependent on the applicant. These funds must be generated abroad and not in Cyprus, through legal means, which must be proven.

The applicant must provide a clean criminal record for himself, his spouse and children from the age of 16. The criminal record must be from the country of origin, issued no more than 3 months before the application.

Work Permits in Cyprus

Foreign nationals from all over the world can take up employment opportunities in Cyprus, which requires a work permit. Citizens from other European Union member states, Iceland, Liechtenstein, Norway, and Switzerland (EFTA) do not require a work permit.

A Cyprus work permit can only be obtained if the employer can substantiate that the work opportunity could not have been filled by a local, or an EU/EFTA citizen. Majority of the non-EU foreign nationals find it much easier to find employment in foreign companies operating on the island.

The positions that are eligible for a work permit include:
Executive Director: Annual salary of €41,000, only five foreign executive directors can be hired by a company.
Middle Management Staff: Directors, Mid-level managers, technical and clerical staff. Annual Salary between €21,000 and €40,000.
Supporting Staff: Workers who do not fall under the former categories.

Before applying for the permit, it is important to finalize a contract with the Cypriot firm, as the employer will obtain the permit on behalf of the foreign national. The applicant has to wait for the approval from the Cyprus Department of Labour.

Immigration Permit Categories:

Category A
The applicant is a self-employed foreign national working in the agriculture, livestock or fish culture sectors in Cyprus. The applicant owns land or has the financial means to own land on the island, and will not undertake any activity to disrupt the economy.

Category B
A self-employed foreign national looking to work in Cyprus’ mining sector, and has sufficient resources and permits, and will not undertake any activity to disrupt the local economy.

Category C
A self-employed foreign national who will undertake a profession or trade, has sufficient financial means and required permits, and will not undertake any activity to negatively impact the local economy.

Category D
A foreign national who will be self-employed in the scientific research sector or an in-demand profession on the island. The applicant will have required academic and professional qualifications, alongside financial resources.

Category E
A foreign national with an offer for a permanent employment position in Cyprus, and whose skills or qualifications will not compete against the local workforce.

Cypriot Citizenship

Naturalization

Citizenship can be naturalized on the basis of years of residence in Cyprus. Foreigners who have been legal residents of Cyprus for 7 years can apply for citizenship. The applicant must complete 2555 days of continuous residency on the island. Applicants who are parents or children of Cypriot citizens require 5 years of continuous residency.

A Cypriot Spouse

Foreign applicants who are married to Cypriot citizens for three years and have completed 2 years of residency on the island can apply for citizenship. Spouses of Cypriot citizenships who have been living abroad can apply for citizenship after three years of marriage. The couple will have to provide reasons for obtaining the citizenship, however, if they have one or more children, no explanation will be required.

Origins in Cyprus

Adults or minors who were born abroad after 16th August, 1960, and whose father was a Cypriot citizen can apply for citizenship. Similarly, adults or minors born after 11th June, 1999, and whose mother was a Cypriot citizen can apply for citizenship. Minors with a Cypriot mother or father can also apply for citizenship. Minors whose mother or father obtained the Cypriot citizenship through naturalization, registration or marriage are also eligible.

Investment Programme

Under the new investment programme, the Cypriot government aims to attract foreign investors with the incentive of offering citizenship to them and their family members. The investors will be require to make an investment of minimum 2 million euros.

Chapter 6: A Guide to The Legal Framework in Cyprus Investment

In this chapter we will give you all the necessary information regarding the legal system especially needed if you are considering any investment in Cyprus.

It will cover everything from anti-money laundering to social insurance.

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Anti-money laundering

The prevention of money laundering is a regulatory initiative that falls within the sphere of various regulatory bodies, including the Central Bank of Cyprus, the Cyprus Bar Association, the Institute of Certified Public Accountants of Cyprus, and the Cyprus Securities and Exchange Commission.

The Unit of Combating Money Laundering (MOKAS) is a second-tier regulatory body that is tasked with preventing, investigating and prosecuting incidents of money laundering and terror financing across all industries and sectors. The anti-money laundering regulations of Cyprus are aimed at preventing serious criminal offences, including terror financing, and detecting and prosecuting all such activities to restrain and confiscate illegal funds.

As per the Cypriot law, money laundering and abetting is a criminal offence, and no individual or entity is allowed to undertake or partake in a one-off transaction without adequate reportage and recordkeeping as per the law. All businesses are obligated to comply with the legalities and regulations to avoid and report money laundering.

Corporate Compliance

Under the Cypriot Commercial Law, all businesses and enterprises are obligated to undertake the corporate compliance regulations. They are obligated to record all the minutes of annual meetings and proceedings amongst the company’s shareholders. These minutes will then be kept at the Cypriot office of the firm.
If there are any changes within the corporate body of the company, such as removal of executive staff or changes in the firm’s share capital, the firm must inform the Cypriot Trade Register.

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Copyright & patents

Under the Cypriot regulations, copyrights are generated automatically. As is the case in most countries and the European Union, there is no process of registering and certifying copyrights in Cyprus. In instances of copyright infringement, there are multiple ways to present evidences for the copyright ownership. In Cyprus, a copyright typically expires 70 years after the death of the author.
Copyrights are considered movable properties, and they can be transferred in writing. A copyright holder cannot, however, transfer all rights completely. The transfers of the work entirely on in parts is done for a specified time period or for a specified region. The Cypriot law protects the patents granted by the European Patent Organization (EPO) as well as the International Application (PCT), if it is the designated country in the application.

Banking & financial Regulations

The Cypriot banking sector is divided into two tiers, which include foreign banks and locally-based banks. The international banks have been encouraged to operate in the island to enhance its fiscal regime, and to use Cyprus as a “launch pad” to pursue expansion and target emerging markets.
There are more 30 foreign banks and financial institutions operating in Cyprus, which conduct international banking businesses, and do not have much interaction with the local economy. The local banks are involved in the traditional dealings of cash deposits, and lending services to households, businesses and entrepreneurs.
In Cyprus, banks conduct their operations under the Universal Banking Model, and they offer a wide array of products and services. These funds deposited by the customers serve as primary sources of funding for banks.
The Central Bank of Cyprus regulates all banking platforms and financial institutions on the island, and it is aligned with the European Union regulations and legislation. Over the years, Cyprus has garnered immense praise for international collaborations for introducing firm reforms to boost its financial institutions and ensure greater compliance in the banking sector.
It is important to note that companies based in Cyprus are not legally obligated to open a bank account in Cyprus, however, it does offer immense convenience. There are more 40 different domestic and foreign banks operating on the island, and the entire banking system is subject to EC Directives and the regulation of the Central Bank of System, which operates independent of the Constitution as it harmonized with the Eurosystem.

Employment Laws

All companies operating in Cyprus are subject to the Cyprus employment law, which is a combination of statute law and common law. The employment relationships, statutory rights and obligations are governed by the principles laid down in standard contract law.

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Social Insurance

Employers are required to pay the contributions and the share of the employee by the end of every calendar month. For instance, the contributions for January 2020 have to be paid by the 28th of February 2020. If the last day of the month is a weekend or a public holiday, then the payment must be made on the next working day.
Individuals who are self-employed are required to pay their contributions on a quarterly basis within a period of one month and ten days. For instance, the contributions for January-March 2020 need to be paid on 10th May, 2020. If the last day of the month is a weekend or a public holiday, the contribution must be paid on the next working day.
Individuals who are voluntary insured can pay their contributions on a monthly or quarterly basis. If the individual is unable to pay the contributions within a year from the end of the contribution years, he/she will lose the right to voluntary insurance for that specific year.
In Cyprus, social contributions are measured on the basis of the earnings. For 2020, the maximum earnings levels have witnessed a small increase.

Company directors and roles

As per the Cypriot legislation’s, each enterprise or company that is limited by shares requires at least one shareholder. Companies and businesses are controlled and overseen by a board of directors. The Cyprus Company Law dictates that a private company based in Cyprus must have at least one director. In other cases, at least two directors are mandatory.
Under the Cypriot tax legislation, the management and control of an enterprise determines the taxation status of the firm. The secretary of the company is required to maintain the company’s record with the Registrar of Companies, organize and file annual tax returns, and inform of any changes in the directors, shareholders, or share capital, amongst others.

Accounting & filing

As per the Cyprus Companies Law, all Cypriot companies and enterprises are required to prepare their financial statements and records in compliance with the International Financial Reporting Standards (IFRS). According to these standards, all Cypriot holding companies are required to prepare their consolidated audited financial statements annually. If the company is an intermediary holding company, consolidation will not be required and the superior company in the ownership chain will provide the consolidated financial statements.
The audited financial statements of the company are prepared to undertake taxation law requirements and they must be provided to the Registrar of Companies.

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Chapter 7: Cyprus Tax System

In the final chapter of our Cyprus Investment Guide 2020 we will talk you through the tax system of the island.

We will give you information regarding corporation tax, double tax treaty and more. This section is undoubtedly essential if you’re considering any sector for investment in Cyprus 

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Personal Taxation

An individual who is tax resident in the Republic of Cyprus (Cyprus) is taxed on income accruing or arising from sources both within and outside Cyprus. An individual, who is not tax resident in Cyprus, is only taxed on income accruing or arising from sources within Cyprus.

Personal Income Tax Rates

Taxable Income €Tax Rate %Tax €Cumulative Tax €
0 – 19.5000  
19.501 – 28.000201.7001.700
28.001 – 36.300252.0753.775
36.301 – 60.000307.11010.885
Over 60.00035  

 

Tax Residency

Adults or minors who were born abroad after 16th August, 1960, and whose father was a Cypriot citizen can apply for citizenship. Similarly, adults or minors born after 11th June, 1999, and whose mother was a Cypriot citizen can apply for citizenship. Minors with a Cypriot mother or father can also apply for citizenship. Minors whose mother or father obtained the Cypriot citizenship through naturalization, registration or marriage are also eligible.
An individual who spends more than 183 days in Cyprus is a tax resident of Cyprus.

An individual can be deemed to be a tax resident of Cyprus if they spend less than 183 days in Cyprus and they satisfies all the following conditions:

  • Does not spend more than 183 days in any other country
  • Is not a tax resident of any other country
  • Spends at least 60 days in Cyprus
  • Maintains a permanent home in Cyprus that is either owned or rented
  • Carries on a business in Cyprus, is employed in Cyprus or holds an office (Director) in Cyprus at any time during the tax year

Exemptions

Certain income is exempt from income tax in Cyprus. This includes, but is not limited to, dividend income and interest income unless the income arises in the ordinary course of the business. Both these types of income are wholly exempt from personal income tax.

Personal taxation is a complex area and as such you are advised to seek advice from your Financial Advisor as they will be able to provide you with personalised advice .

Capital Gains Tax

Capital Gains Tax is currently charged at a rate of 20% on the following:
  • Gains from the disposal of immovable property situated in Cyprus
  • Gains from the disposal of shares of companies not listed on a recognised stock exchange which own immovable property situated in Cyprus
  • Gains from the disposal of shares of companies which indirectly own immovable property situated in Cyprus and derive at least 50% of their market value from such immovable property
The following are deducted from the sale proceeds in calculating the capital gain:
  • The value of the immovable property as at 1 January 1980 or cost of the immovable property if the date of acquisition is later, as adjusted for inflation
  • The cost of any accepted capital additions and improvements as adjusted for inflation
  • Expenditure incurred solely in respect of the gain (e.g. transfer fees, approved real estate agent commission, interest expense)

Capital Gains Tax Exemptions

Under the law, there are certain disposals which are not subject to Capital Gains Tax. These include but are not limited to:
  • Transfers arising on death.
  • Gifts made from parent to child or between spouses or between up to third degree relatives.

Allowances

Individuals are entitled to the following lifetime allowances:

  • Disposal of principal private residence (subject to conditions) €85.430
  • Disposal of agricultural land by a farmer €25.629
  • Other disposals €17.086

Reducing your Capital Gains Tax Liability

There are perfectly legal ways of reducing your Capital Gains Tax liability. These include but are not limited to:

  • Capital losses may be used to offset a capital gain
  • If you are selling your property partly or fully furnished, come to an arrangement with your buyer whereby they purchase any furniture, etc. using a separate agreement. This will reduce your Capital Gains Tax liability as the items included in the agreement should not be liable for Capital Gains Tax
Capital Gains Tax is a complex area and as such you are advised to seek advice from your Financial Advisor as they will be able to provide you with personalised advice .

Corporation Tax

The corporate tax rate is 12.5%; this is one of the lowest corporate tax rates in the European Union.

Tax Residency

A company is tax resident in Cyprus if the company is managed and controlled from Cyprus. A company that is tax resident in Cyprus will be taxed on all income from sources from within and outside Cyprus. A company that is not tax resident in Cyprus will be taxed on income from sources within Cyprus.

Exemptions

There are a number of sources of income that are exempt from income tax. These include but are not limited to:
  • Dividend income
  • Interest income provided it does not occur as a result of the ordinary operations of the business

Deductible Expenses

All expenses incurred in the course of business operations are deductible when calculating tax liability of a company. Expenses are deductible at different rates depending upon the expense type. Your financial advisor is best placed to ensure the company maximizes tax efficiency.
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Double Tax Treaty

When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings arises. Countries therefore sign Double Tax Treaties, also known as Double Tax Agreements, with each other to sort out these and other questions. A key aim of these agreements is to prevent the same income being taxed twice, so called double taxation.

Click here to see whom Cyprus has Double Tax Treaties with

Intellectual Property

Intellectual Property (IP) can be one of the most valuable assets of an orgainisation. Cyprus offers a tax efficient European Union location together with being able to safeguard and protect IP.

The IP tax regime covers a wide range of intangibles including but not limited to:

  • Copyrights e.g. sound recordings, films, publications, software programs, literary works
  • Trademarks
  • Patented inventions
Tax Benefits of Cypriot Resident IP Companies:
  • 80% of worldwide royalty income generated from IP (net of direct expenses) is exempt from tax
  • 80% of profit generated from the disposal of IP (net of direct expenses) is exempt from tax
  • Any capital expenditure for the acquisition or development of IP is claimed as a tax deduction is claimed as a tax deduction in the year in which was incurred and for the following 4 years on a straight line basis

Unilateral Foreign Tax Credit Relief

If income is subject to tax in Cyprus, relief for taxes paid abroad is offered by way of a tax credit. This relief is given unilaterally irrespective of the existence of a double tax treaty. If there is a double tax treaty in force, the terms of that will apply if they are more favorable.

Value Added Tax

Value Added Tax (VAT) is imposed on the supply of all goods and services in Cyprus and on the acquisition of goods from other members of the European Union and on the importation of goods from third countries.

VAT Rates

RateVAT %Example
Standard rate19%All goods & services that don’t fall into any of the other categories
Reduced Rate9%Hotel accommodation, catering services
Reduced rate5%Books, magazines, newspapers, use of sporting facilities
Zero rate0%Services relating to imports, exports
Exempt from VAT Supplies in the public interest e.g. ambulance, postal service

Related: What Makes Cyprus an Attractive Investment Market