If you reside in Cyprus for more than 183 days in any year, you are required to pay tax on income generated in Cyprus and on any worldwide income. Once a residence permit has been granted, you should register with the income tax office as a taxpayer.
There are two taxation schemes in operation, one for people who are employed (standard scheme) and another for those people in receipt of a pension from abroad. The progressive tax rates for working taxpayers (standard scheme) are 0% for income up to EUR19,500, 20% for income above that up to EUR28,000, 25% for income above that up to EUR36,300, and 30% for income over EUR36,300.
People who receive a pension benefit from a favourable tax rate of only 5% on any pension income in excess of EUR3,417.20 per annum.
A person in receipt of a pension from abroad may, however, elect in any year to have their pension included in their total chargeable income and pay tax according to the standard scheme. This is more beneficial where the person has additional taxable income and wishes to take advantage of the EUR19,500 personal allowance. This would lead to a tax saving for the individual, where the chargeable income, including the pension, is less than €25,000.
Cyprus is a signatory to the Treaty for the Prevention of Double Taxation. This Treaty, in principle, enables offsetting tax paid in one of two countries against the tax payable in the other, thus preventing double taxation.
Cyprus has double-taxation treaties with a number of countries, including the UK, Ireland, Russia , Norway and Sweden.
Tax Exempt Income for Individuals
- An individual's income up to EUR19,500 per resident
- A pension from overseas up to a limit of EUR3,417.20
- Gain from the disposal of securities, which include shares, government stocks, debentures, bonds, founder’s shares and rights thereof
- All interest income (but see section on Special Contribution for Defence)
- The lower of 20% of the remuneration from an employment, which is exercised in the Republic by a person who was a non-resident before the commencement of his employment, and €8.543. This exemption applies for a period of three years from 1 January of the year following the year in which the employment commenced
- Compensation for death and injury
- Capital gains (see section on Capital Gains)
The following are deducted from income:
- Donations to approved charitable organisation
- Rental income – 20% of gross income is exempt
- Subscriptions to trade unions and professional bodies
- Social Insurance, provident fund, medical fund, pension fund contributions and life insurance premiums (the allowable annual life insurance premium is restricted to 7 percent of the insured amount) - up to 1/6 of the chargeable income.
The following social grants are provided for:
Grant for every child receiving full time higher education in Cyprus (with certain restrictions) or full time university education outside Cyprus. Families with more than three children receive an additional grant.
Grant for blind persons
Basic child grant and additional child grant for families that have a gross family (applicant, spouse, children) income below the specified threshold.
The amounts of social grants payable are revised annually and announced at the beginning of each year.
Special Contribution for Defence for Individuals
This is payable on the interest on income earned by Cyprus tax residents. Non-tax residents are exempt from special contribution for defence. Dividend income is charged at the rate of 15%, rental income (reduced by 25%) is charged at the rate of 3%, and all other income at the rate of 10%.
Capital Gains Tax
Capital Gains Tax is payable by both residents of Cyprus and non-residents at the rate of 20% on the profit following the sale of a property in Cyprus after the following deductions have been made :
- the first €17.086.14 (per joint owner)*
- a figure for inflation
- transfer fees
- Estate Agents fees (providing the agent is registered)
- Legal fees, and
- the cost of any additions to the property (provided receipts can be produced).
There are execeptions, for example, on transfer of the property because of a death and in the case of gifts to relatives.
* If the property sold has been the home of the Vendors for at least five years, the allowance is €85.430.
Capital losses may be used to offset the gain or, if you are selling your property partly or fully furnished, an arrangement can be made with the new purchaser whereby the furniture can be purchased via a separate agreement, thus reducing Capital Gains Tax liability.
Inheritance / Gift Tax
Inheritance tax and estate duty have been abolished. There is no tax on gifts.
For information about property-related taxes, please see the Legal Information page or click here.