- HOW INDIVIDUALS ARE TAXED
| Taxable Income€ | Tax Rate% | Tax€ | Cumulative Tax€ |
| 0 – 19.500 | 0 | 0 | 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 |
| 60.001 and over | 35 |
- Domiciled Cyprus tax residents are taxed on their international income,
- Non – Domiciled Cyprus tax residents are taxed on their international income but certain exception apply,
- Non-Cyprus tax residents are taxed only on the income generated in Cyprus,
A tax resident is a person that is located within the territory of the Cyprus republic for 183 per calendar year
Important Exceptions
- No tax on disposal of securities (i.e. Sales of titles (i.e. shares, bonds etc),
- 20% of gross Rental Income is exempt from Vat. However, gross rental Income is also taxed by the special defence contribution law at the rate of 2.25% (only for domiciled tax residents) and also by the National Health Insurance scheme (GESY) by the rate of 2.65% (on all rental income),
- Profit from the disposal of immovable property is exempt from Income Tax if its not within the main activities of the company (i.e., not a developer company). However, these profits are taxed under the Capital gains tax at the rate of 20%,
- Dividend income is exempt from Income tax, however is taxed by Special Defence contribution law at the rate of 17% only for domiciled individuals
- How the company is taxed
A company is taxed on profit (Income less expenses) on a 12,5% profits. For capital expenditure (i.e. Immovable property, equipment, movable property) a wear and tear allowance is provided given the type an intended use.
However effective tax rate low due to:
- No tax on disposal of securities (i.e. shares, bonds),
- Exemption system on dividends / profits from abroad (under certain conditions),
- No Withholding Taxes on any payments,
- Extensive treaty network,
- Double taxation relief on any income,
- Tax free exit,
- Effective tax is 28,69% (12,5%+17%*87.5%+2.65%*87.5%) for Cyprus domiciled individuals shareholders,
- Effective tax is 14.82% (12,5% + 2.65%*87.5% )for Cyprus Non domiciled individuals shareholders,
- Effective tax is 14.82% (12,5% + 2.65%*87.5% ) for Non-resident individuals on income generated in Cyprus only
- CAPITAL GAINS TAX (CGT)
CGT applies only to gains relating to Cyprus-situated immovable property when the disposal is not subject to CIT.
Disposal for the purposes of CGT specifically includes sale, exchange, lease, gifting, abandoning use of right, granting of right to purchase, and any sums received upon cancellation of disposals.
CGT at the rate of 20% is imposed on gains arising from the disposal of immovable property situated in Cyprus or the disposal of shares in companies that own Cyprus-situated immovable property. CGT is also imposed on disposals of shares in companies that indirectly own immovable property situated in Cyprus where at least 50% of the market value of the said shares derives from Cyprus-situated immovable property. Shares listed on any recognised stock exchange are excluded from CGT.
In the case of disposal of company shares, the gain is calculated exclusively on the basis of the gain relating to Cyprus-situated immovable property. The value of the immovable property will be its market value at the time the shares were disposed of.
The taxable gain is generally calculated as the difference between the disposal proceeds and the original cost of the property plus any improvements as adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus. In the case of property acquired before 1 January 1980, the original cost is deemed to be the value of the property as at 1 January 1980 on the basis of the general valuation conducted by the Land Registry Office under the Immovable Property Law.
Other expenses that relate to the acquisition and disposal of immovable property are also deducted from the gain, subject to certain conditions (e.g. interest costs on related loans, transfer fees, legal expenses).
It is important to note that, subject to conditions, land, as well as land with buildings, acquired at market value (excluding exchanges, donations, and foreclosures) from unrelated parties in the period 16 July 2015 to 31 December 2016 will be exempt from CGT upon their future disposal.
Finally, certain disposals are totally exempt from CGT based on their nature (e.g. gifts from parents to children or between spouses).
- SPECIAL DEFENCE CONTRIBUTION
| Description | INDIVIDUALS % – Domiciled | INDIVIDUALS % – Non-Domiciled | COMPANIES % |
| Dividend income from Cyprus resident companies | 17 (5) | Nil | Nil |
| Dividend income from non-Cyprus resident companies | 17 (5) | Nil | Nil (under conditions) (1) |
| Interest income arising from the ordinary activities or closely related to the ordinary activities of the business | Nil | Nil | Nil |
| Other interest | 30 (2)(3)(5) | Nil | 30 (4) |
| Rental income (reduced by 25 %) | 3 (5) | Nil | 3 |
- Dividend income from abroad is exempt from SDC provided that:
- no more than 50 % of the paying company’s activities result directly or indirectly in investment income or
- the foreign tax burden is not significantly lower than the tax rate payable in Cyprus. The Tax Authorities have clarified that significantly lower, means a tax burden rate below 6.25%. When the exemption does not apply, the dividend income is subject to SDC at the rate of 17 %.
- Interest income from Cyprus Government bonds and Corporate bonds and all interest earned by a provident fund is subject to SDC at 3% (instead of 30%)
- Where the total income of an individual including interest does not exceed €12.000 in a taxable year, then the rate is reduced from 30 % to 3 %.
- Bank fixed deposit interest.
- Dividend income, rental income and interest income from bank accounts is exempt for taxation under SDC for the ”non domicile” individuals (explained in section below).
- GESY RATES (NATIONAL HEALTH INSURANCE)
| Contribution percentages | 1/3/2020 -31/3/2020 | 1/4/2020 -30/6/2020 | 1/7/2020 onwards |
| Employees | 2.65% | 1.70% | 2.65% |
| Employers | 2.90% | 1.85% | 2.90% |
| Self-employed | 4.00% | 2.55% | 4.00% |
| Pensioners | 2.65% | 1.70% | 2.65% |
| Persons holding any office | 2.65% | 1.70% | 2.65% |
| Republic or any physical or legal person responsible for the payment of emoluments to officer(s) from their appointment or election | 2.90% | 1.85% | 2.90% |
| Incomers | 2.65% | 1.70% | 2.65% |
| Fixed Fund (State) | 4.70% | 1.65% | 4.70% |
- Transfer Fees on immovable property (paid by the purchaser)
| Property Value in € | % | Fees € * | Cumulative € * |
|---|---|---|---|
| Up to 85,000 | 3 | €2,550,00 | €2,550,00 |
| 85,001 – 170,000 | 5 | €4.250,00 | €6.800,00 |
| Over 170,001 | 8 |
For transfers of properties without vat transfer fees are reduced by 50%.
- SD] Stamp duties (paid by the purchaser)
| Purchase price bands (€) | Percentage rate (%) | SD due (€) |
| Up to 5,000 | 0 | €0 |
| Above 5,000 – Up to 170,000 | 0.15 | €247,50 |
| Above 170,000 + | 0.2 | € |
| Total SD due | € |
Maximum amount of transfer fees is €20.000