Cyprus: Make Cyprus Your Home

Last Updated: 14 June 2017
Article by Michael Mavrommatis

Cyprus offers many benefits to foreign investors who are looking for a jurisdiction which offers financial stability, a gateway to Europe, a high quality of life and one of the safest environments in the world.

The government's commitment to progressive measures for reform and growth has resulted in the impressive recovery of the Cypriot economy, much earlier than expected. Cyprus today is an EU success story, a status enhanced by continuous upgrades from the main credit rating agencies.

Cyprus.....in a nutshell!

  • EU member since 2004 & EMU member since 2008.
  • Third fastest growing economy in the Euro area.
  • Cyprus is at the crossroads of 3 continents – Europe, Africa and Asia.
  • Cyprus maintains one of the most attractive tax systems in Europe. The corporation tax rate is 12.5%.
  • Cyprus is the largest 3rd party management centre in the EU. It is home to some of the world's leading names of the shipping industry, and has the 10th largest merchant fleet in the world.
  • Cyprus is a very attractive jurisdiction for private aircraft registration in the EU, as well as for yacht registration.
  • Cyprus proudly features on the white list of the OECD and has legally committed to the highest standards of transparency by assuming early adopter status for the automatic exchange of information on tax matters.
  • The legal system is based on the UK common law principles and aligned with EU law and regulations.
  • Cyprus has recently been ranked 1st among smaller Countries and 5th worldwide in the Safest Countries in the World study.
  • Excellent public and private international schools.
  • Cyprus' famous beaches have been awarded with 57 Blue Flags in 2015, ranking the island first in the EU.
  • The second biggest city in Cyprus, Limassol, has been ranked 4th best retirement destination globally by the 2016 Knight Frank Global Lifestyle Review.
  • Gastronomy, culture, history, art.... and great weather!!

Basis of Taxation

Taxation in Cyprus is based on residence and domicile. Individuals are considered tax resident when they spend more than 183 days during the calendar year in Cyprus. Companies are considered tax resident if they are managed and controlled from Cyprus.

Cyprus Tax system

Cyprus offers an attractive and transparent tax regime, fully compliant with EU, OECD and international laws and regulations. Its main features are:

  • One of the lowest corporate income tax rates in the EU at 12.5%
  • Dividend participation exemption
  • Exemption on disposal of securities and many other financial instruments (e.g. shares, bonds, debentures, units in funds etc.)
  • No withholding taxes on dividend, interest and royalty payments abroad
  • No capital gains tax (except for the disposal of real estate in Cyprus or of shares in companies holding Cypriot real estate).)
  • No succession taxes
  • Attractive intellectual property regime
  • Tonnage tax for shipping companies
  • Notional interest deduction for investments into Cyprus companies
  • More than 60 double tax treaties

Personal taxation rates and benefits of the Cyprus tax regime

The following income tax rates apply to individuals:

Chargeable income (€) Tax rate (%) Cumulative tax liability (€)
0 – 19,500 Nil Nil
19,501 – 28,000 20 1,700
28,001 – 36,300 25 3,775
36,300 – 60,000 30 10,885
Over 60,000 35

An individual tax resident in Cyprus who receives income from pension outside Cyprus could be potentially be subject to a flat 5% tax on such income.

Certain attractive personal taxation benefits and exemptions are also available, notably:

  • Exemption from tax on dividends, interest and rental income of non-Cyprus domiciled individuals (non-doms) who are Cyprus tax residents.
  • 50% of employment income, for employees who take up residence in Cyprus, is exempt for 10 years if remuneration is in excess of €100,000. In such cases the top rate of personal tax is therefore reduced to 17.5% and the effective tax rate could be as low as 8%.
  • A similar exemption to the above, provides for an exemption of 20% of employment income, with a maximum amount of € 8,550 annually for a period of 5 years (available until 2020 only). This applies to employment income of lower than €100,000.

Cypriot citizenship by investment

Attracting foreign direct investment is at the heart of Cyprus' development strategy, since it represents a key driver for economic growth. The Cyprus government has introduced a scheme for granting foreign investors Cypriot citizenship.

A non-Cypriot citizen can now apply for Cypriot citizenship, provided that an amount of €2m is invested in either Alternative Investment Funds or financial assets of Cypriot companies or organisations that are licensed by the Cyprus Securities and Exchange Commission or in Real Estate, Land Development and infrastructure projects or Purchase / Establishment / Participation in Cyprus businesses or companies or even a combination of all the above.

In addition, a high-ranking senior manager may apply for Cypriot citizenship, provided that he/ she receives sufficient remuneration to generate tax revenue of at least €100,000 over a three year period.

Additional conditions & requirements

The investment must be made the three years preceding the date of application and be retained for at least three further years.

In addition, the applicant must:

  • Acquire a permanent residence in Cyprus valued at least €500,000. (This condition does not apply if the investment is in residential property, under criterion 2 above).
  • Have no criminal record
  • The parents of the investor can apply for the Cyprus citizenship following the purchase of a permanent residence costing at least €500,000.

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.

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