Tax in Cyprus

Personal Tax in Cyprus

The low corporate tax rate, the attractive income tax regime with multible tax exemptions and deductions are the most important advantages, but Cyprus has much more to offer. A state member of the European Union, Cyprus provides the opportunity to companies and investors to operate under a secure legal framework and environment, protecting businesses and at the same time promoting their growth.

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The tax obligations based on the yearly income of any Cyprus Tax Resident.

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Any individual who spends more than 183 days in Cyprus in a calendar year, is considered a Cyprus Tax Resident and therefore can be taxed on his income. In other circumstances an individual can also be considered a Cyprus Tax Resident under the more recent 60 days rule.

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A Cyprus Tax resident is taxed on his worldwide income.

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Income under 19.500 is not taxable in Cyprus.

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50% of remuneration from employment in Cyprus is exempted from income tax for the first 10 years. This rule applies for individuals that were not tax residents before the commencement of the employment and provided that the annual remuneration exceeds €100.000.

An alternative of 20% exemption is also valid for 3 years if employee annual remuneration is less than €100.000

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The tax rate applies only on the excess amount on top of the 19.500.
If for example your annual income is 20.000, you will be taxed 20% on the 500 Euro income.

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Yes, many income tax exemptions apply. Check the exemptions table below.

Exemptions of income tax for individuals

Type of Income	Exemption
Dividends	Whole amount
Remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment. Exemption applies for a period of 10 years provided that the annual remuneration exceeds €100.000.	50% of the remuneration
Remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment, for 3 years since the 1st of January of the year following the year the employment started. For employments commencing after the 1st of January 2012 or later the exemption applies for a period of 5 years starting from the tax year following thew year of commencement of the employment with the last eligible tax year being 2020. This exemption may not be claimed in addition to the immediately above mentioned 50% exemption for employment income	20% of the remuneration with a maximum amount  €8.550 annually
Remuneration from salaried services outside Cyprus for more than 90 days to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer	Whole amount
Profits from the sale of securities	Whole amount
Lump sum received by way of retiring gratuity, commutation of pension or compensation for death or injuries.	Whole amount
Capital sums accruing to individuals from any payments to approved funds (e.g provident funds)	Whole amount
Profits of a foreign permanent establishments under certain conditions	Whole amount

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Yes there are some expenses that are deducted from the annual income tax.

TAX Deductions on the income of individuals

Type of income	Deducted form income
Donations to approved charities	Whole amount
Since the 1st of January 2017 any amount invested each tax year in approved innovative small and medium size enterprises,either directly or indirectly	Up to the 50% of taxable income as calculated prior to this deduction (maximum of €150.000 deductions per year) The amount of discount that was not used can be transferred and claimed in the next 5 years.
Contributions to trade unions or professional bodies	Whole amount
Income from property rental	20% of rental income
Social insurance contributions, medical funds (maximum 1.5% of remuneration), pension and Provident fund contributions (maximum of 10% of remuneration) and life insurance (maximum 7% of the insured amount)	Up to 1/6 of the chargeable income
Loss of current year and previous years (for individuals required to prepared audited financial statements, current year losses and losses of the previous five years only may be deducted)	Whole amount

{slider title=”Are there any additional forms of taxation in Cyprus?” open=”false” scroll=”true”}

No there are no other forms of taxation for individuals.

{slider title=”Does an individual need to pay for social securities in Cyprus?” open=”false” scroll=”true”}

Yes, every employed or self-employed individual has to pay social securities on top of his net salary. In the case of employment, the employer also contributes to the amount towards social security department.

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Yes. There is a guide we have prepared and it’s free to download on our library section.

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Corporate Tax in Cyprus.

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The corporate tax rate in Cyprus is 12,5% and is calculated on the annual profit of any Cyprus registered company.

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Any Cyprus registered entity (Tax resident company) has to pay tax in Cyprus.

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A Cyprus resident company is taxed on the income accrued or derived from sources in Cyprus and abroad. A non-Cyprus resident company is taxed on the income accrued or derived only from sources in Cyprus.

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No there is not. All Cyprus companies are taxed on 12,5% on their profits.

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Yes. Corporate tax exemptions apply. Check the table below.

Corporate Tax exemptions.

Type of income	Exemptions
Dividents	Whole amount
Profit from the sale of securities	Whole amount
Interest not arising from the usual activities or closely related to the ordinary activities of the company	Whole amount
Gains related to foreign exchange differences (forex) with the exception of forex arising from trading in foreign currencies and related derivatives	Whole amount
Profits of a foreign permanent establishment, under certain conditions	Whole amount
Benefits, profits or redundant obtained from restructuring	Whole amount

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Any expenses incurred wholly and exclusively in earning (taxable) income are deducted for corporate tax purposes.

Type of expense	Deduction
Interest expense incurred for the direct or indirect acquisition of 100% of the share capital of a subsidiary company will be treated as deductible for income tax purposes provided that the 100% subsidiary company does not own (directly or indirectly) any assets not used in the business. If the subsidiary owns (directly or indirectly) assets not used in the business, the interest expense deduction is restricted to the amount which relates to assets used in the business.	Whole amount
Equity introduced to a company as from 1 of January 2015 (new equity) in the form of paid up share capital or share premium is eligible for an annual notional interest deduction (NID). The annual NID deduction is calculated as an interest rate on the new equity. The relevant interest rate is the yield on 10 year government bonds (as at December 31 of the prior tax year) of the country where funds are employed in the business of the company plus a 3% premium (subject to a minimum amount which is the yield on the 10 year Cyprus government bond as the same date plus a 3% premium).	The NID deduction cannot exceed the 80% of taxable profit derived from assets financed by new equity (as calculated prior to the NID deduction)
Donations to approved charities (with receipts)	Whole amount
Royalty income, embedded income and other qualifying intangible assets according to the “new” Cyprus regime (1 July 2016)	80% of the net profit as calculated in accordance with the “new” regime
Royalty income, embedded income and other qualifying income derived from qualifying intangible assets according to the “old” Cyprus IP box.	80% of the net profit
Expenses for scientific researches including research for development that is carried out from small-middle size enterprises.	Whole amount
Employer’s contributions to social insurance and approved funds on employees’s salaries.	Whole amount
Employer’s contributions to medical funds from employees.	1% on employee’s remunaration
Employer’s contributions to Provident/Pension funds for employees.	Up to 10% on employee’s remunaration
Entertainment expenses for business purposes.	The lower amount of €17.086 or 1% on the gross company income

Type of expense	No deduction
Expenses the purpose of which was not the acquiring of income	Whole amount
Private car expenses	Whole amount
Interest applicable to the cost of acquiring a private vehicle regardless the use and on other assets that were not used for establishment purposes.	Whole amount for 7 years since the day of acquiring the relevant asset.
Salaries provided within a tax year, and of which the contributions to social insurance or other approved funds were not paid within the same year.	Whole amount

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Entities like non-profit organizations or Intellectual property Holdings may be treated or benefit from other tax approaches.

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The tax loss occurred after a tax year and which cannot be set off against other income, is carried forward subject to conditions and is set off against the profits of the next five years.

Loses from permanent establishments abroad can be set off with profits of the company in Cyprus. Subsequent profits of an exempt permanent establishment abroad are taxable up to the amount of losses allowed.

{slider title=”Is there a full Tax guide for in Cyprus?” open=”false” scroll=”true”}

Yes, you can download our free Cyprus Corporate Tax guide in our Library section.

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