Tax – Cyprus & International

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Cyprus tax: An overview of Cyprus's taxation system

Cyprus (or "the Republic") has an overall appealing taxation system, with one of Europe's lowest corporate tax rates. Furthermore, as a full member of the European Union, Cyprus is committed to justice, fairness, and the rule of law. At the same time, the Cypriot system benefits from the European Commission's expertise in finance, competition, and corporate governance. This page provides general guidance on Cyprus tax rules as well as an overview of the taxing system.
When does a company have to pay taxes in Cyprus?

If a company is managed and controlled in Cyprus, it is taxed there (the so-called “real seat theory”).
Assume a company is not a Cyprus tax resident. In that case, income from Cyprus sources and income from a business activity carried out through a Cyprus-based permanent establishment (PE) will be taxed. According to Bloomberg Tax & Accounting, a PE is a “fixed place of business” that includes a management office, a factory, a workshop, a mine, an oil or gas well, a quarry, and, in general, any natural resources extraction unit.

Tax on Rental Income

Tax residents must pay taxes on their rental income. Individuals (physical persons) have a rate of 20% to 30%. The rate for corporations (legal persons) is 12.5%. A Special Contribution for Defense is levied on rental income; the rate is 3% on 80% of rental income for both individuals and businesses.
As of January 20, 2021, 20% of gross rental income is tax deductible.

Special defense contribution (SCD)

Certain types of income, such as dividends, interest income, and rental income, are subject to a special contribution for defense. The percentage is 17%.

Individuals must pay SCD if they are both Cyprus tax residents and domiciled in Cyprus. Cyprus residency can mean one of two things. Either way, they have a domicile (a home) in Cyprus since birth, or second, they have been tax residents of Cyprus for 17 out of 20 tax years before the year in question.

Companies that are Cyprus tax residents must pay SCD.

SCD is not paid by non-tax residents.

Tax – Cyprus & International

Tax is a mandatory fee for individuals and legal entities, levied by the government. The collected fee is used to cover general government services, activities, goods etc.

Income Tax Cyprus

Income Tax Brackets & Tax Rates

First €19,500: 0%
€19,501 – €28,000: 20%
€36,301 – €60,000: 30%
Over €60,000 : 35%

Cyprus Income Tax Calculator

Corporate Tax Cyprus

The corporate income tax rate in Cyprus is 12.5%. This makes Cyprus one of the most attractive jurisdictions for international business and investment. The low corporate tax rate, combined with its favorable tax regime for international business and investment, has made Cyprus a popular location for holding and financing companies, as well as for other international business activities.
Exceptions to corporate income tax are, income from dividends and profit from the sale of securities.


Real Estate Taxes in Cyprus

Real Estate taxes in Cyprus include:

Immovable Property Tax: Its an annual tax levied on the ownership of immovable property as of January 1st of each year. The tax rate is based on the market value of the property, with different tax bands and rates for residential and commercial properties.

Transfer Fees: When a property is purchased in Cyprus, transfer fees are payable to the government. The transfer fees are calculated as a percentage of the property’s market value and are payable by the buyer.

Municipal Taxes: Municipalities in Cyprus have the power to levy annual taxes on real estate, known as municipal taxes. The amount of tax payable depends on the municipality and the value of the property.

Value-added tax (VAT)

Companies that earned more than 15,600 euros in the previous twelve months must register for VAT. Self-employed individuals must also register for VAT and are subject to VAT rules and regulations. VAT is collected electronically four times per year.

GHS (General Health System)

Employees and pensioners will contribute 2.65% of their monthly income to the GHS beginning March 1, 2020, according to gesy.org. Employers will pay GHS 2.90% of each employee’s salary. Individuals who work for themselves will contribute 4%.

Tax contributions

Income tax registration (form T.D. 2001) and VAT registration (form T.D. 1101) are required (if applicable). The individual or business will then be given a Tax Identification Code (TIC) and a VAT registration certificate (if applicable). All forms must be completed and can be found at mof.gov.cy.

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Ioannis Michalaki

Ioannis Michalaki

CEO, Partner
Elena Pitsillidou

Elena Pitsillidou

Managing Director, Partner