Cyprus: Living In Cyprus: A ScrumpTAXious Proposition

Cyprus has always been an attractive tourist destination, as well as a great place to relocate and call home. Being family and business friendly, it has so far won over the hearts of over 180.000 foreign nationals who live and work on the island, making up 22% of the country's total population.

Now, Cyprus has further reinforced another aspect of its allure: that of personal taxation.

Having recently adopted highly attractive domicile provisions, the island aspires to also become an ideal country for private domiciliation.

Below is an analysis of the reasons why.


The key to understanding personal taxation in Cyprus lies with the important concepts of 'tax residency' and 'domicile'.

a) Tax Residency

A Cyprus tax resident physical person is any person who is physically present in Cyprus for more than 183 days in a calendar year. It does not matter the purpose of being in Cyprus, nor is it a condition that a Cyprus tax resident person owns or rents accommodation in Cyprus. It is literally based on the number of days without any further conditions.

b) Domicile

According to the domicile concept under the tax legislation, every person has at any given time either:

  1. the domicile received by him/her at birth ('domicile of origin'), or
  2. the domicile (not being the same as the domicile of origin) acquired or retained by him/her by his/her own act ('domicile of choice').

Under (i) above, the domicile of origin of a legitimate child is that of the father's, or in the case of an illegitimate child, that of the mother's.

Under (ii) above, a person may acquire a domicile of choice by establishing his/her home at any place in Cyprus with the intention of permanent or indefinite residence.

For tax purposes however, a non-domiciled individual will be deemed as domiciled in Cyprus if he/she has been a Cypriot tax resident for at least 17 out of the last 20 years prior to the relevant tax year (deemed domicile rule).

An individual who has a domicile of origin in Cyprus, may still qualify as non-domiciled subject to certain conditions, namely to have not been a Cyprus tax resident for a consecutive period of 20 years.


A tax resident individual, irrespective of his/her domicile status, is subject to income tax on his/her worldwide income, although there are a number of favourable deductions and exemptions in the legislation as explained below.

A non-tax resident individual is subject to income tax on income accruing or arising only from sources within Cyprus and is exempt from any Cyprus tax on dividend and interest income.

However, where a person is non-domiciled in Cyprus, but is a Cyprus tax resident, the following main benefits exist, for a period of at least 17 years, i.e. until the person is deemed domiciled in Cyprus (see above):

  • no Cyprus tax is payable on receipt of any dividend income from anywhere in the world (although on foreign dividends, the source country may withhold taxes);
  • the provisions whereby a Cyprus tax-resident company must declare at least 70% of its after-tax accounting profits within two years (known as the 'deemed distribution rules'), do not apply to that proportion of shareholding beneficially owned by a non-Cyprus domiciled individual;
  • no Cyprus tax is payable on receipt of interest income from anywhere in the world (although on foreign interest, the source country may withhold taxes).


Taxable income, i.e. gross income less exemptions less deductions, up to €19.500 is exempt from income tax. The taxable income exceeding this amount is subject to progressive tax rates ranging from 20% to 35% (the higher rate being for taxable income exceeding €60.000).


The following exemptions are available for individuals moving to Cyprus to commence employment:

  • 20% of the employment income, up to a maximum of €8.550 annually

    This exemption applies until the 2020 tax year inclusive, but cannot be granted for a total period exceeding five years. Previously, the exemption was only available for a total period of three years. The exemption applies from the start of the year following the year of employment.
  • 50% of the employment income

    A 50% exemption applies to salary income of a non-tax resident individual, who takes up residence in Cyprus to work for an employer in Cyprus. The exemption applies for a period of 10 years starting from the first year of employment provided that the annual income of the employee exceeds €100.000 per annum; and

    • the exemption will not be available where the individual was a Cyprus tax resident in any three of the previous five tax years preceding the commencement of employment in Cyprus, although this only applies to employments that commence on or after 1 January 2015; and
    • the exemption will not be available where the individual was a Cyprus tax resident in the year preceding the year of commencement of employment in Cyprus, although this only applies to employments that commence on or after 1 January 2015; and
    • the exemption will be granted for any tax year in which the annual total gross emoluments from the employment exceed €100.000, regardless if in a specific tax year, these were less than €100.000. This is subject to the total emoluments exceeding €100.000 at the start of the employment and the Commissioner of Taxation being satisfied that the fluctuation in the total gross emoluments is not solely to obtain the exemption.
    It is noted that where an individual is benefiting from the 50% exemption, this individual cannot benefit at the same time from the 20% exemption, as stated above.

4.1 Income tax exemption for overseas employment

Where an employee is Cyprus tax resident, then salaries from rendering services outside Cyprus to a non-resident employer or to an overseas permanent establishment of a resident employer for more than 90 days in a tax year are exempt from income tax.

In order for the 90 day rule to apply there must be an employee/employer relationship.

4.2 Exemptions on gains arising from the disposal of securities

Any gains arising from the disposal of shares, bonds and other similar equity financial instruments are exempt from income tax.

Any income from a buy-back or redemption of units in funds is also exempt from income tax.

4.3 Exemption from capital gains tax on sale of real estate

Profit arising from the disposal of immovable property situated outside Cyprus is exempt from any taxation (including capital gains tax) in Cyprus, although the foreign property may be subject to tax in the jurisdiction where it is located.

Furthermore, a specific capital gains tax exemption is introduced on profits relating to the disposal of an immovable property located in Cyprus, if this property is acquired within the period 16 July 2015 and 31 December 2016. The date of the future disposal is irrelevant.


A Cyprus tax resident receiving a pension from abroad can choose one of the following two options to be taxed on the pension income, the choice being available every year:

  • the pension can be taxed under the progressive income tax rates with the first €19.500 of net taxable income being tax-free; or
  • the first €3.420 of the foreign pension being tax free, with the remaining balance being taxed at a flat rate of 5%.

Any lump sum received as a retirement gratuity is exempt from tax.


In general, the below deductions are available for Cyprus tax resident individuals:

  • donations to charities that have been approved by the Department of Taxation ;
  • payments relating to special contribution;
  • payments relating to contributions to the Social Insurance Fund and similar contributions, even when paid abroad;
  • payment relating to premiums for life insurance (limited to 7% on the insured capital amount) and contributions to pension plans.
  • there is an overall limit on personal allowance deductions (i.e. deductions for life-insurance premiums and contributions to funds including pension and social insurance) of 1/6 of the taxable income before these deductions.
  • payments relating to premiums paid to approved medical funds are tax deductible, provided that they do not exceed 1,5% of the gross salary income.


Cyprus generally does not impose wealth, gift, inheritance, endowment or exit taxes.


a) Example 1 - Dividend and Interest Income

A non-Cyprus domiciled individual relocates to Cyprus in December 2015. During 2016, while being a Cyprus tax resident, she received €150.000 dividends from Cyprus companies and €750.000 from foreign companies.

She also received €15.000 interest income from her Cypriot personal savings account and €25.000 interest income from a notice account held with a foreign bank. No foreign tax was withheld on the interest income received from the foreign banks.

The individual did not have any other income.

The total interest and dividends income received will be exempt from Cyprus tax.

Dividend Income – Cyprus sourced 150.000
Dividend Income – Overseas sourced +750.000
Total Dividend Income 900.000
Interest Income – Cyprus sourced 15.000
Interest Income – Overseas sourced +25.000
Total Interest Income 40.000
Total Income 940.000
Total income which is exempt from taxation (both income tax and special contribution for defence) in Cyprus 940.000
Total Tax payable in Cyprus on dividend and interest income 0

b) Example 2 - Remuneration

Mr. Ivanov relocated to Cyprus in December 2014 and started working in Welcome-To-Cyprus Ltd from 1/1/2015 as a Senior Regional Manager earning an annual gross salary of €110.000. His annual salary of €110.000 relates to employment services rendered within Cyprus. Mr. Ivanov also travelled to Dubai, of the UAE, to work for Welcome-To-Cyprus Ltd's Dubai permanent establishment for an aggregate period of 4 months. During the period of the overseas work in Dubai, Mr. Ivanov received an extra salary of €25.000 and an overseas special allowance of €7.500.

Calculation of Mr. Ivanov' 2015 income subject to tax in Cyprus is as follows:

Basic salary relating to Cyprus employment 110.000
Salary relating to UAE employment 25.000
Overseas special allowance relating to UAE employment 7.500
Total income 142.500
50% of the Cyprus sourced remuneration (55.000)
Exempt overseas remuneration – 90 days rule (25.000)
Overseas special allowance (7.500) (87.500)
Social Insurance Contributions (7.8%x€54.396*) (4.243)
Special contribution (1.520) (5.763)
Total Taxable Income 49.237
Personal Income Tax Calculation
From €0 up to €19.500 0% 0
From €19.501 up to €28.000 20% 1700
From €28.001 up to €36.300 25% 2075
From €36.301 up to €60.000 30% 3.881
From €60.001 and over 35% -
Income Tax 7.656
Special Contribution 1.520
Social Insurance 4.243
Total Income Tax, special contribution and social insurance 13.419

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.