Complete Guide on: Cyprus Investment 2023
This is a complete guide to Cyprus Investment in 2023.
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.
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Chapter 1: Cyprus 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 until May 2023 reveal that with a 1.25 million population, it is the third most populated Mediterranean island, and stands 159th in the world ranking. Over the years, Cyprus has attracted ex-pats from all over the world, and today, it hosts around 196,000 foreign permanent residents.
As of 1st January 2024, the estimated population of Cyprus stands at 1,268,467, witnessing an increase of 0.64%, with over 13,000 people relocating to the island. (Source: World Population Review )
Cyprus enjoys a rich and fascinating history, coated with Greek mythology. Mythological archives reveal that Cyprus is 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 the 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 76% 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, Russian 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.
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. Cyprus 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 deriving from the sale of company shares. 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 a wide array of modern amenities and facilities at surprisingly low costs. It ranks as the 34th country globally on the life quality index, with strong consumer purchasing power, affordable cost of living, and quality healthcare.
Member of the European Union
On May 1st, 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, Cyprus 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
Cyprus 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. Statistics from December 2020 reveal that approximately 59.80% of the Cypriot workforce boosts a tertiary degree.
Efficient Legal Regulation
Cyprus 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 infrastructure and more.
Lifestyle & 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.
In June 2019, Cyprus launched GeSY (GHS Cyprus) General Healthcare System, a new national health program. This national health insurance program seeks to provide Cyprus people with reliable and efficient medical services. Citizens now have the option of choosing their own doctor, hospital, or some other GeSY-affiliated healthcare provider.
Once signed up with GHS/GeSY, you will have unrestricted access to a general practitioner (GP) and in-patient treatment. The GHS protects beneficiaries’ medical needs, including chronic, rare, and critical illnesses.
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 59.80%.
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.
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 of less than 1 million, which creates a relatively small internal market.
The island also is also weakened by some external debt, associated with 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 for 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, 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.
Related: Cyprus Real Estate Sector: A Review
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.
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
Chapter 4: Real Estate Investment Guide for Cyprus 2021
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.
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 a 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 year 2020 began with astounding growth in the Cypriot construction sector, with burgeoning foreign interest in acquiring properties and planning developments across the island. However, the global pandemic brought a period of stagnation worldwide, and Cyprus had to close its borders, like all responsible nations worldwide. 2021 brought a new wave of developments, and once pandemic restrictions eased, Nicosia was the first real estate markets to spring back into action. In 2023, Cyprus property sales hit €1.7 billionin first quarter of 2023 (Source: Cyprus Profile)
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 complexes 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
- Local property taxes
- Property transfer fees
- Stamp duties
- Value added tax
- Immovable property taxes
Other costs that might relate to purchasing include legal fees, real estate agent’s fees, and insurance.
A report published by the Central Bank of Cyprus earlier this year reveals that property rates in Cyprus have increased steadily during the third quarter of 2021. The report reveals that these increments are driven by the burgeoning demand and rising sales of apartments. 2021 witnessed 0.3% increase in property prices in the first quarter, and 0.5% in the third quarter. The yearly increase is recorded at 1.2%, which is approximately 0.9% higher than the figures recorded in 2020. (Source: Cyprus Mail)
Related: Buying Property in Cyprus: Five Most Important Steps
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.
2023 has witnessed a 12% increase in the rental rates for apartments, and a 3.1% increment in the rental rates for houses.
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.
Related: Renting Your Property in Cyprus: Main Things to Consider
Selling a Property in Cyprus
There are various mediums to sell a property in Cyprus. Owners can organize the sale themselves or hire a licensed realtor on a commission basis to organize the sale for them.
There are countless listing portals and digital platforms that help sellers and agents 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 its growth is the 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 had increased by a whopping 52.6%. Limassol had 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 the relevant permits from the relevant authorities, including planning and building permits. These are usually carried out by the architect assigned with the drafting of the architectural plans.
In certain cases, property owners are required to provide specialized studies along with their applications. These include electrological, mechanical, static, and energy performance studies. The authorities will then conduct an on-site inspection of the property and its surrounding area to rule out safety and health hazards. These studies can be carried out by architects or civil engineers assigned for the work.
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.
Permanent Residency in Cyprus
Cyprus offers an expedited procedure for the permanent residency to investors from third countries, running parallel to the normal ‘Category F’ immigration permit. In order to apply for this permanent residency scheme, an investment in residential real estate, commercial real estate, company’s shares, or AIFs can be made. A property must in any way be purchased or rented on the island for any investment.
The investment involving a purchase of a residential real estate is probably the most cost effective since the same investment can be used for applying and also as the place of habitation of the applicant. In this case, the applicant can 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 in order to apply. The applicant must provide substantial proof of the foreign money transfer of the whole amount, and 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 provide proof for a secured annual income of €30,000, and an additional €5,000 for each individual dependent on the applicant. These funds must be generated from abroad and not in Cyprus, through legal means, which must be proven, since this residency permit is a non-working permit.
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. Th majority of 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.
Category F:
A foreign national who possesses a secured annual income, high enough to give them a decent living in Cyprus, without having to engage in any business, trade or profession. Most applicants come under this Category, the majority of them being pensioners or retired persons.
Cyprus' New Digital Nomad Visa Program
As part of the recent news in 2021, Cyprus has announced its new Digital Nomad Visa Program starting from January 2022.
Applicants who are employed, self-employed, or freelancers can get permits issued for one year with the option to renew for another two years.
Holders of the Digital Nomad Visa must earn at least €3,500 per month, have medical insurance, and have a clean criminal record.
The digital nomads in Cyprus should prove their income by the employment agreement or other relevant proof and a bank account.
In the case of having family members. The income amount is increased by 20% if there is a spouse/civil partner and by 15% for each child.
Cypriot Citizenship
Naturalization
A Cypriot Spouse
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.
Related: Immigration Laws in Cyprus: Everything You Need to Know
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.
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.
Copyright & patents
Under the Cypriot regulations, copyrights are generated automatically. As is the case in most countries and in 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 or 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 than 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 from 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 than 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.
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 2021 have to be paid by the 28th of February 2021. 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 2021 need to be paid on 10th May, 2021. 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 2021, 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.
Chapter 7: Cyprus Tax System
In the final chapter of our Cyprus Investment Guide 2021 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.
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 – 19.500 | 0 | ||
| 19.501 – 28.000 | 20 | 1.700 | 1.700 |
| 28.001 – 36.300 | 25 | 2.075 | 3.775 |
| 36.301 – 60.000 | 30 | 7.110 | 10.885 |
| Over 60.000 | 35 |
Tax Residency
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 satisfy all of 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
- 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 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
- 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
Tax Residency
A company is a tax resident in Cyprus if the company is managed and controlled from Cyprus. A company that is a tax resident in Cyprus will be taxed on all income from sources from within and outside Cyprus. A company that is not a tax resident in Cyprus will be taxed on income from sources only within Cyprus.
Exemptions
- Dividend income
- Interest income provided it does not occur as a result of the ordinary operations of the business
Deductible Expenses
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.
Intellectual Property
Intellectual Property (IP) can be one of the most valuable assets of an organization. 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
- 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 in the year in which it was incurred and for the following 4 years on a straight line basis
Unilateral Foreign Tax Credit Relief
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
| Rate | VAT % | Example |
| Standard rate | 19% | All goods & services that don’t fall into any of the other categories |
| Reduced Rate | 9% | Hotel accommodation, catering services |
| Reduced rate | 5% | Books, magazines, newspapers, use of sporting facilities |
| Zero rate | 0% | Services relating to imports, exports |
| Exempt from VAT | Supplies in the public interest e.g. ambulance, postal service |
Non-Dom Taxation Policy
Cyprus taxation scheme allows the digital nomads to become tax residences within 60 days. This scheme allows the digital nomads in Cyprus to benefits from the most attractive taxation system in the EU. To be eligible for the non-dom taxation policy, you need to:
- Spend at least 60 days in Cyprus without being taxed in other countries
- Spend more than 183 days per year in Cyprus
- Have a permanent home in Cyprus (Rental or Ownership)
- Have your own business or be an employer in Cyprus
Here are some of the attractive taxation schemes in Cyprus:
- The lowest corporate income tax rate of 12.5% in Europe
- Tax exemptions for Dividend income, Interest income, Profits from the sales of securities, and more
- A tax-free threshold of €19,500 for income taxes
- 20% income tax for incomes within €19,501 — €28,000
- 25% income tax for incomes within €28,001 — €36,300
- 30% income tax for incomes within €36,301 — €60,000
- 35% income tax for incomes within €60,001 and more