Introduction

Understanding the tax system in Cyprus might seem overwhelming, but it doesn't have to be. Whether you're a resident, business owner, or investor, having a clear picture of how taxes work here is crucial. This guide breaks down the main aspects of Cyprus taxation into simple, easy-to-follow summaries.

From personal taxes and corporate obligations to VAT, property taxes, and beyond, this guide covers it all. If you want to dive deeper into any topic, you'll find links to detailed articles that explain everything step by step.

Use this guide as your starting point to grasp the essentials and dive deeper into the specifics of Cyprus taxes at your own pace.

Tax Residency

Tax residency is a way for a country to decide what kind of taxes you must pay there.

If you're not a Cypriot living in Cyprus, the first thing to consider is whether you qualify to become a tax resident of Cyprus since tax residents pay income tax on their income from sources in and out of Cyprus. There are two ways to do that.

• 183 days rule - Stay in Cyprus for 183 non-consecutive days in a year, or

• 60-day rule - Stay here for 60 days, work and have a permanent residence here and don't stay anywhere else for 183 days.

To claim the 60-day rule, fill out and submit form T.D. 126 to the Tax Department.

*Just because you register a Cypriot company doesn't automatically make you eligible for tax residency!

Full Guide On Tax Residency.

Non-Domicile Status

Domicile is the place you treat as your permanent home.

Non-Cypriots who become tax residents can claim non-domicile status to avoid paying Special Defence Contributions (17%) on dividends, interest, and rental income. They still pay 2.65% GESY and income tax.

Apply using form T.D.38 and questionnaire T.D.38Qa at your local Tax Department.

Full Guide On Non-Domicile.

Social Insurance and General Healthcare System (ΓεΣΥ)

As an Employer

As of the 1st January 2024, the minimum monthly wage is €1,000 gross for full-time employees.

Registration

Payment

These payments must be made by the end of the following month for which they are due.

A an employer, you must also create an account in the ERGANI platform.

As an Employee

Social Insurance

General Healthcare System

Gross and Net Salary

Employee contributions are deducted from your gross salary.

If you have two jobs, you will be paying these contributions for both.

Your employer will be making the payments on your behalf.

As a Self-Employed

Contribution Rates from your Earnings

Registration

Your contributions are calculated from your earnings and the state estimates your earnings based on your occupation. If you earn less than the minimum amount set by the state, you can apply using form YKA 1-017 to have your contributions based on your actual earnings.

If you are both an employee and self-employed at the same time, you need to pay social insurance for both.

Payment

Remember that you'll have to make these payments yourself every three months.

Rental Income

Rental income is not subject to Social Insurance contributions. It is however subject to 2.65% GHS contributions. GHS contribution on rental income only applies when the landlord is an individual, if the landlord is a company, they are exempt from paying GHS on rental income.

For Individual Tenants

Where the tenant of a property is an individual, the landlord must file a self-assessment and pay the GHS on the 30th of June for the first half of the year, and 31st of December for the second half of the year. Payments are made through the Tax Portal.

For Company Tenants

Where the tenant is a company or a partnership, GHS on rental income is withheld at the source at a rate of 2.65% of the gross rental amount.

This means that the tenant is responsible for deducting this amount from the gross amount of rent and pay the GHS contribution to the Tax Authorities with Form IR614A on the 30th of June for the first half of the year, and 31st of December for the second half of the year. Once again, payments are made through the Tax Portal.

Dividend Income

Dividends are subject to GHS at the rate of 2.65%. Companies must deduct GHS contribution from the dividends of their shareholders and pay it to the Tax Authorities.

Companies must declare these using form TD603 and pay the GHS through the Tax Portal by the end of the month following the month in which the dividends were paid.

Full Guide On Cyprus Social Insurance and Healthcare System.

Income Tax

Tax Brackets

Total Income

Remember, your income isn't just your salary from your job. You must include all types of income.

You calculate your income tax using your net income, not gross income. Meaning after deductions have been made.

Certain types of income are exempt from income tax, meaning they are not counted when calculating income tax.

After you find your net income, you can see which tax bracket you fall into and how much income tax you need to pay. However, just because you fall under a specific tax bracket does not mean that you'll pay that percentage on your entire income.

You can calculate your income tax using our tax calculator.

Registration, Returns and Payment

Registration

Tax Returns

Tax returns are submitted online through TaxisNet.

The deadline is the 31st of July of the following year.

Multiple Income Sources

If both employed and self-employed, complete separate returns for each.

Tax Payment

Employees - PAYE (Pay As You Earn)

Employees don't have to worry about tax payment as their employer is required to pay them on their behalf through the PAYE system.

Self-Employed Provisional Tax Payment

• Pay taxes in advance based on estimated income.

• Payment is made in two equal instalments.

• Payment deadlines: 31st July and 31st December.

Adjustments:

• Submit revised calculations by 31st December if income estimates change.

• Underestimation: Pay a 10% fine if declared income is less than 75% of actual income.

• Overestimation: You can claim a refund for excess tax paid.

Full Guide On Income Tax for Individuals in Cyprus.

Cryptocurrency and FOREX Tax

Cryptocurrency Taxation

No law or official guideline has been released regarding the taxation of cryptocurrency trading. However, as of now, the Tax Department seems to consider profits from actively trading in cryptocurrencies as part of your taxable income and therefore subject to income tax.

Actively trading can be broadly defined and does not just refer to day traders. It is enough that you position yourself in a way that grows your portfolio over time. Profits from trading as an individual will be considered as self-employment income and therefore subject to social insurance and Gesy as well.

However, It's still best that you ask the Tax Department directly about your situation.

Foreign Exchange (FOREX)

Any profit resulting from exchange rate differences due to currency fluctuations is tax-neutral. This means that gains or losses from changes in exchange rates are not subject to income tax.

However, this exemption does not apply to profits made from trading currencies.

So, if you're an active trader and you primarily buy and sell currencies and make a profit from currency fluctuations then this profit will be considered taxable income and again subject to social insurance, GHS and income tax.

Neither cryptocurrency trading nor Forex trading is taxed under capital gains tax. Capital gains tax is only applicable to the sale of property in Cyprus.

Full Guide On Cryptocurrency and FOREX Taxation in Cyprus.

Corporate Tax

Corporate tax is a tax that businesses pay on their profits. It's like income tax for companies. If a company makes money, it has to pay a percentage of that money to the government as tax. Cyprus has one of the lowest Corporate Tax rates in Europe at 12.5% on profits.

Companies must be managed and controlled from Cyprus in order to maintain their Cypriot Tax Residency.

Exemptions and Deductions

Companies have exempted income and deductions they can make from their income before calculating corporate tax.

Applicable deductions include expenses used entirely for generating income for the business which can be supported by documentation such as salaries and contributions of employees, repair and maintenance on buildings and machinery, and many others. You can also deduct a percentage of the value of your assets every year for wear and tear.

However, there are certain expenses that you cannot deduct including expenses that are not solely for earning business income like personal expenses.

Losses Carried Forward

If a business in Cyprus loses money in a given year, it can use that loss to reduce its taxable income for the next five years. This means that if the business makes a profit in any of the next five years, it can subtract the initial loss from that profit to lower the amount of income that is subject to tax.

Registration

Tax Returns

All companies in Cyprus are required to submit Tax Returns regardless of their income.

The submission deadline for tax returns for a given year is the 31st of March of the second year following that tax year.

The submission of your company's tax returns is made online through TaxisNet.

Provisional Tax Payment

Companies must pay provisional tax which is essentially an early payment of your company’s taxes based on a self-estimation of the profits of your company in the coming year.

• Pay taxes in advance based on estimated income.

• Payment is made in two equal instalments.

• Payment deadlines: 31st July and 31st December.

Adjustments

• Submit revised calculations by 31st December if income estimates change.

• Final tax payment on August 1st of the following year

• Underestimation: Pay a 10% fine if declared income is less than 75% of actual income.

• Overestimation: You can claim a refund for excess tax paid.

Full Guide On Corporate Tax in Cyprus.

Special Defence Contribution

Tax residents of Cyprus that are also domiciled in Cyprus that receive income from dividends, interest and rents are required to pay the Special Defence Contribution (SDC).

SDC Rates

• Dividends - 17%

• Interest - 3%

• Rental Income - 3% on 75% of the rent

Dividends

• Companies must withhold SDC before paying dividends.

• They must then declare the withheld SDC on TaxisNet using form TD603.

• Payments are made through the Tax Portal.

• Payment deadline: End of the month following the month in which the dividends were paid.

Deemed Dividend Distribution

Two years after the tax year profits arise, companies must pay Special Defence Contribution and GESY on 70% of deemed dividends, even if no actual dividends were paid to the shareholders. Shareholders then owe this amount to the company.

For example, if you're the sole shareholder of a company that made a profit of €10,000 in 2022. Assuming that the company hasn't paid any dividends to you for that year until 2024, it will be deemed by the tax authorities that the company has paid you €7,000 in dividends for the profits of 2022 (even if this wasn’t the case). The company will then have to pay €1,190 (7,000 * 17%) towards the SDC on your behalf.

• Companies must declare the deemed dividend distribution on TaxisNet using form TD623.

• Payments are made through the Tax Portal.

• Payment deadline: 31st of January.

Rental Income

SDC is taxed at 3% on 75% of the gross rental income regardless of the amount.

If your tenant is a physical person, you must file a self-assessment and pay SDC through the tax portal on the 30th of June and 31st of December.

If your tenant is a company, they must withhold SDC from rent and pay them using Form IR614A.

Full Guide On Special Defence Contribution in Cyprus.

Value Added Tax (VAT)

Value Added Tax (VAT) is a special tax imposed on all goods and services (with some exceptions).

Tax rates

Registration, Returns and Payment

Every business, whether that be a company or an individual, has to register for VAT if they meet one of the following:

• Their turnover exceeded €15,600 in the last 12 months

• They expect to exceed €15,600 within the next 30 days

• They have been providing services to taxable persons in other EU countries

• They bought goods worth more than €10,251.61 from other EU countries in the year starting from the 1st of January or they expect to exceed that threshold in the next 30 days

• They are not established in Cyprus but are engaging in taxable transactions with individuals in Cyprus or expect to do so in the next 30 days

Registration

VAT Returns

After you register you must submit your VAT returns online through the TFA Taxpayer Portal every three months, even if no transactions took place.

VAT Payment

After submitting your VAT returns, you must pay any VAT owed by the 10th day of the second month following the end of that reporting period.

VAT Refunds

Businesses can claim a VAT Refund when they pay more VAT on their business expenses (input) than VAT they receive from selling their goods and services (output). They can choose to offset future VAT owed or claim to have that amount refunded.

Claims for VAT refunds are made through the TFA Taxpayer Portal after completing form T.D.2008 and submitting it to the Tax Department office with an IBAN certificate.

VIES & Intrastat

If you have transactions within the EU you may also have to register for VIES and Intrastat.

Full Guide On Value Added Tax (VAT) in Cyprus.

Capital Gains Tax

Capital gains tax in Cyprus at the rate of 20% is only applicable to profits from the sale of property in Cyprus.

This also applies to the sale of shares of a company that owns property in Cyprus or indirectly owns property in Cyprus and 50% of its market value is from immovable property.

Calculating Capital Gains Tax

Sale Price - (Purchase Price + Additional Costs + Lifetime Allowance) = Taxable Profit

Taxable Profit x 20% = Capital Gains Tax

Purchase Price (Adjusted for Inflation)

Because of inflation, you must adjust the purchase price for inflation by dividing the Inflation Rate in the year of sale by the Inflation Rate in the year of purchase.

Then, you multiply the result with the original purchase price and you get the purchase price adjusted for inflation.

Additional Expenses

After you find the purchase price adjusted for inflation, you can add any additional expenses that were made exclusively for making a profit to the deductible amount.

These can include renovation costs, legal fees and other costs. Again, you can adjust these expenses to account for inflation to find the inflation-adjusted expenses with the calculation we used for finding the inflation-adjusted purchase price.

Lifetime Allowances

Individuals are entitled to lifetime allowances which can be claimed once and can also be added to the deductible amount. These are:

• €85,430 for the Sale of a Primary Residence

• €25,629 for the Sale of Agricultural Land by a Farmer

• €17.086 for Any Other Sale

Transfers in cases of inheritance or gifts between close relatives are exempt from capital gains tax.

Full Guide On Capital Gains Tax in Cyprus.

Transfer Fees and Other Property-Related Taxes

Land Registry Transfer Fees

When transferring a property in Cyprus, the Land Registry imposes a transfer fee which is paid by the person receiving the transfer.

In cases where the property transaction in question is not subject to VAT, the law provides for a 50% reduction of the transfer fee.

Some exemptions from transfer fees include transactions that have VAT (like newly built properties). Transfers from parent to child have a 0% transfer fee.

Levy on Property Disposals

In 2021, the Government introduced a 0,4% levy on the proceeds arising from all immovable property disposals.

Stamp Duty

Legal documents related to transactions involving property are subject to stamp duty which provides validity and recognition from authorities.

Contracts/Agreements

Stamp Duty is calculated on the value of the Contract/Agreement as follows:

Immovable Property Tax

As of 2017, immovable property tax has been abolished.

Inheritance Tax

As of 2000, inheritance tax has been abolished.

Full Guide On Transfer Fees and Property Taxes in Cyprus.