Taxes in Cyprus - A full guide to taxation

Cyprus is a Mediterranean island nation located in the Eastern part of the European Union. It has a well-developed economy and is a popular destination for expats and tourists. The country has a favorable tax system that attracts many foreign investors and entrepreneurs. 

In this article, we will explore the various aspects of the Cyprus tax system, including the tax rates, the types of taxes, and the tax exemptions available to non-residents. We will also delve into the topic of Cyprus as a tax haven and discuss the process of relocation to the island.

Expats in Cyprus

Cyprus has a large expat community consisting of people from various countries around the world. The country has a warm climate, beautiful beaches, and a rich cultural heritage that make it an attractive destination for those seeking to relocate. Expats in Cyprus enjoy a high standard of living and a relatively low cost of living compared to other countries in the EU.

The Cyprus tax system: An overview

The Cyprus tax system is based on a progressive tax rate, which means that the tax rate increases as the income level increases. The tax year in Cyprus is the calendar year, and taxes are due on the 31st of December. The Cyprus tax system is administered by the Department of Inland Revenue, which is responsible for the collection of taxes and the enforcement of tax laws.

tax in cyprus

VAT in Cyprus

Value-Added Tax (VAT) is a consumption tax that is levied on the sale of goods and services in Cyprus. The standard VAT rate in Cyprus is 19%, but there are reduced rates of 5% and 9% for certain goods and services. VAT is charged on most goods and services in Cyprus, including food, clothing, and household items.

Tax calendar

The tax calendar in Cyprus is as follows:

  • January 31st: Last day for submission of tax returns for the previous year.
  • February 28th: Payment of any tax due for the previous year.
  • April 30th: Payment of provisional tax for the current year.
  • July 31st: Submission of a declaration of estimated tax liability for the current year.
  • October 31st: Payment of provisional tax for the current year.

Types of taxes in Cyprus

There are several types of taxes in Cyprus, including:

Income tax: This is a tax on an individual's income, including salary, wages, and business profits. The tax rate ranges from 0% to 35%, depending on the income level.

Property tax: This is a tax on the ownership of real estate property in Cyprus. The tax rate is 0.25% of the value of the property.

Capital gains tax: This is a tax on the profit made from the sale of a capital asset, such as a piece of real estate or a business. The tax rate is 20% of the gain.

Inheritance tax: This is a tax on the transfer of wealth upon the death of an individual.  The tax rate ranges from 0% to 40%, depending on the relationship between the deceased and the inheritor.

Stamp duty: This is a tax on the transfer of ownership of property or the execution of certain legal documents. The tax rate ranges from 0.15% to 8%, depending on the value of the property or the legal document.

Double tax treaties

Cyprus has double tax treaties with over 50 countries around the world. These treaties aim to prevent individuals from being taxed twice on the same income by allowing them to claim a tax credit or exemption in one country for taxes paid in the other country. Double tax treaties also provide for the exchange of tax-related information between countries to facilitate the enforcement of tax laws.

Tax exemptions for non-residents

Non-residents of Cyprus are only taxed on income that is generated in Cyprus. However, they may be eligible for certain tax exemptions, such as the 50% tax exemption on dividends received from a Cyprus company. Non-residents can also claim a tax credit for taxes paid in their country of residence on income that is also taxed in Cyprus.

The 60 days rule

The 60 days rule is a tax rule in Cyprus that applies to non-residents who spend more than 60 days in the country in a tax year. Non-residents who exceed the 60-day threshold are considered to be tax residents of Cyprus for the entire tax year, and are therefore required to pay taxes on their worldwide income. The 60 days rule applies to both individuals and companies.

cyprus flag with hotel in the background

The 183-day rule

The 183-day rule is a tax rule that applies to individuals who spend more than 183 days in a country in a tax year. The 183-day rule is used by many countries to determine tax residency status. In Cyprus, individuals who exceed the 183-day threshold are considered to be tax residents of the country for the entire tax year, and are therefore required to pay taxes on their worldwide income. The 183-day rule applies to both individuals and companies.

Taxes on corporate income

In Cyprus, corporate income is taxed at the corporate tax rate of 12.5%. This rate is one of the lowest in the EU and makes Cyprus an attractive destination for businesses.

Companies in Cyprus are required to file a tax return and pay taxes on their annual profits. The tax year for companies is the same as the calendar year, and taxes are due on December 31st. Companies can also choose to be taxed on a quarterly basis.

In addition to corporate income tax, companies in Cyprus may also be required to pay other taxes, such as VAT and stamp duty. 

Tax incentives

Cyprus offers several tax incentives to encourage investment and stimulate economic growth in the country. These incentives are designed to attract foreign businesses and entrepreneurs to the island.

Aside from the low corporate tax rate (12.5%), other tax incentives for companies in Cyprus include the 80% tax exemption on dividends received from a Cyprus company and the 100% tax exemption on profits from the disposal of securities. These exemptions are designed to encourage investment in the country.

How to pay taxes

In Cyprus, taxes can be paid online through the Department of Inland Revenue's website or at a bank. Payment can be made by debit or credit card, or through a bank transfer. It is important to pay taxes on time to avoid penalties and interest charges.

Cyprus as a tax haven

Cyprus has been referred to as a tax haven due to its low corporate tax rate of 12.5% and its attractive tax exemptions for non-residents. However, the country has implemented measures to address concerns about tax evasion and money laundering, such as the automatic exchange of tax-related information with other countries. As a result, Cyprus is no longer considered a tax haven by the EU and the Organization for Economic Cooperation and Development (OECD).

Relocation to Cyprus

If you are considering relocating to Cyprus, there are a few steps you need to take. Firstly, you need to obtain a visa to enter the country. You can apply for a tourist visa, a work visa, or a residence permit, depending on your purpose of visit. You can also apply for citizenship by naturalization if you meet the requirements.

Getting residency

To obtain residency in Cyprus, you need to apply for a residence permit. You can apply for a temporary or permanent residence permit, depending on your circumstances. The process of obtaining a residence permit involves submitting various documents, such as a passport, birth certificate, and proof of employment or financial stability.

Buying property

Cyprus has a thriving real estate market, with a variety of properties available for purchase, including apartments, houses, and villas. Foreigners are allowed to buy property in Cyprus, but there are some restrictions on the type of property that can be purchased. For example, non-EU citizens are not allowed to purchase agricultural land.

If you want to learn more, be sure to read our Ultimate Guide to Buying A Property in Cyprus

Key info about property tax rates

In Cyprus, property tax is levied on the ownership of real estate property. As stated, the tax rate for property tax is 0.25% of the value of the property. This rate applies to both residential and commercial properties.

Property tax is paid annually on the last day of the year. Property tax is assessed based on the value of the property as of January 1st of the tax year. The value of the property is determined by the Department of Lands and Surveys.

Property tax is an important source of revenue for the government of Cyprus and helps to fund public services, such as schools, hospitals, and infrastructure.

In addition to property tax, individuals who own property in Cyprus may also be required to pay other taxes, such as stamp duty. 

Overall, property tax rates in Cyprus are relatively low and are an important consideration for those looking to purchase property on the island.

Final thoughts

Cyprus is a beautiful and welcoming country that offers a favorable tax system and a high standard of living. The tax system is based on a progressive tax rate, and there are several types of taxes, including income tax, property tax, and capital gains tax. 

Non-residents may be eligible for certain tax exemptions, and the country has double tax treaties with over 50 countries. If you are considering relocation to Cyprus, you will need to obtain a visa and apply for a residence permit. The country has a thriving real estate market, with a variety of properties available for purchase. Overall, Cyprus is an attractive destination for expats and investors.

FAQ

Who is required to pay taxes in Cyprus?

All residents of Cyprus are required to pay taxes on their worldwide income. Non-residents are only required to pay taxes on income that is generated in Cyprus.

What is the tax year in Cyprus?

The tax year in Cyprus is the calendar year, and taxes are due on December 31st.

What is the standard VAT rate in Cyprus?

The standard VAT rate in Cyprus is 19%. However, there are reduced rates of 5% and 9% for certain goods and services.

Are there any tax exemptions available to non-residents in Cyprus?

Non-residents may be eligible for certain tax exemptions, such as the 50% tax exemption on dividends received from a Cyprus company. Non-residents can also claim a tax credit for taxes paid in their country of residence on income that is also taxed in Cyprus.

Can foreigners buy property in Cyprus?

Yes, foreigners are allowed to buy property in Cyprus. However, there are some restrictions on the type of property that can be purchased. For example, non-EU citizens are not allowed to purchase agricultural land.

How do I obtain residency in Cyprus?

To obtain residency in Cyprus, you need to apply for a residence permit. You can apply for a temporary or permanent residence permit, depending on your circumstances.

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