Cyprus Tax System
The Cyprus tax system is one of the most appealing systems within Europe. It provides excellent benefits for investment with its low Corporation Tax and Double Tax Treaty as well as its tax deductions for investment into startups. It is easy to understand why the Cyprus Tax System helps welcome so many investors to the island especially as it is a member of the European Union, meaning investors are offered access to all EU Tax Directives.
With any subject regarding tax, especially specialized tax, you should always seek advice from your financial adviser as they will be able to provide personalized information. However, we will give you a basic guide to the Cyprus tax system with data, indicators and statistics.
Personal Income Tax Rates
The Cyprus tax system works with Personal Income Tax using the following method: An individual who is tax resident in the 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.
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
Exemptions
Cyprus Tax System: 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)
Exemptions
Allowances
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
Corporation Tax
Tax Residency
Exemptions
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.
Cyprus has this agreement with 65 nations, again you can understand why the Cyprus tax system is so attractive to investors.
Intellectual Property
Intellectual Property (IP) can be one of the most valuable assets of an organization. Cyprus tax system 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 copyrights e.g. sound recordings, films, publications, software programs, literary works as well as trademarks and 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
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.
| 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 |
