Taxation in cyprus
Taxation in Cyprus refers to the tax system of the Republic of Cyprus, an island country in the Eastern Mediterranean and member state of the European Union. Cyprus operates a territorial tax system with relatively low rates compared to other EU member states, which has made it a popular jurisdiction for international businesses and expatriates.
Overview
Cyprus has developed its tax framework in line with EU directives and OECD standards. The country is not classified as a tax haven by the EU or OECD, maintaining full compliance with international tax transparency requirements including the Common Reporting Standard (CRS) and Base Erosion and Profit Shifting (BEPS) framework.[1]
The tax system is administered by the Tax Department of the Ministry of Finance, with tax returns filed through the TAXISnet online portal.[2]
Corporate taxation
The standard corporate tax rate in Cyprus is 15%, one of the lowest in the European Union.[3] This rate applies to the worldwide income of companies that are tax resident in Cyprus. A company is considered tax resident if its management and control is exercised in Cyprus.
Key features of the corporate tax system include:
- Intellectual Property (IP) Box regime: An effective tax rate as low as 2.5% on qualifying profits from intellectual property assets, compliant with the OECD's modified nexus approach.[4]
- Notional Interest Deduction (NID): Companies can deduct a notional interest on new equity, reducing the effective tax rate on equity-financed investments.
- Participation exemption: Dividends received from subsidiaries and gains from disposal of securities are generally exempt from corporate tax.
- No withholding tax on dividends, interest, and royalties paid to non-residents (subject to conditions).
- Extensive treaty network: Cyprus has over 65 double taxation treaties.[5]
Personal income tax
Personal income tax in Cyprus follows a progressive rate structure:
| Annual income (EUR) | Tax rate |
|---|---|
| Up to 19,500 | 0% |
| 19,501 - 28,000 | 20% |
| 28,001 - 36,300 | 25% |
| 36,301 - 60,000 | 30% |
| Over 60,000 | 35% |
Employment income is also subject to social insurance contributions of 8.8% (employee share) and contributions to the General Healthcare System (GESY) of 2.65%.[6]
Non-domiciled tax status
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Since 2015, Cyprus offers a non-domiciled (non-dom) tax status to individuals who are tax residents but not domiciled in Cyprus. Under this regime, qualifying individuals are exempt from the Special Defence Contribution (SDC) tax, which applies to:
- Dividend income (normally taxed at 17%)
- Interest income (normally taxed at 30%)
- Rental income (normally taxed at 3%)
As a result, non-domiciled individuals who structure their income primarily through dividends from a Cyprus company can achieve an effective tax rate of approximately 5%, consisting of corporate tax at 15% on company profits and 0% on dividend distribution, plus 2.65% GHS contribution on dividends.[7]
An individual qualifies as non-domiciled if they were not born in Cyprus (domicile of origin is not Cyprus) or have not been a tax resident of Cyprus for 17 out of the last 20 years. The non-dom status is available for a period of 17 years from the date of first becoming a Cyprus tax resident.[8]
60-day tax residency rule
Cyprus introduced a 60-day tax residency rule in 2017, allowing individuals to become tax resident by spending as few as 60 days per year in Cyprus, provided they meet certain conditions:
- They do not spend more than 183 days in any other single country
- They are not tax resident in any other country
- They maintain a permanent residence in Cyprus (owned or rented)
- They carry on business or are employed in Cyprus or hold office in a Cyprus tax-resident company[9]
This rule has proven particularly attractive for digital entrepreneurs and remote workers who split their time between multiple countries.[10]
Special Defence Contribution
The Special Defence Contribution (SDC) is an additional tax that applies only to individuals who are both tax resident and domiciled in Cyprus. Rates are:
- 17% on dividends
- 30% on interest (with reduced rates for certain types)
- 3% on 75% of rental income
Non-domiciled individuals are fully exempt from SDC, which is one of the primary advantages of the non-dom regime.[11]
Value Added Tax
Cyprus applies Value Added Tax (VAT) in accordance with EU VAT directives:
- Standard rate: 19%
- Reduced rates: 9% and 5% (applicable to certain goods and services)
- Zero rate: applies to intra-community supplies and exports
The reduced 5% VAT rate on the first property purchase by Cyprus residents is a notable incentive for individuals relocating to the country.[12]
Capital gains tax
Capital gains tax in Cyprus applies only to gains arising from the disposal of immovable property situated in Cyprus or shares in companies that hold such property. The rate is 20%.
Gains from the sale of securities (shares, bonds, debentures) are fully exempt from taxation, regardless of the amount.[13]
International standing
Cyprus is a member of the European Union, the Eurozone, and the OECD Global Forum on Transparency and Exchange of Information. The country has been removed from all international "grey lists" and maintains a transparent tax system compliant with EU Anti-Tax Avoidance Directives (ATAD).[14]
See also
References
- ↑ OECD, "Cyprus - Tax Policy Reform", OECD Tax Policy Studies, 2024.
- ↑ Republic of Cyprus, Tax Department, "TAXISnet Services", taxisnet.mof.gov.cy.
- ↑ PwC, "Cyprus Tax Facts 2025", PwC Cyprus, 2025.
- ↑ Deloitte, "Cyprus IP Box Regime", Deloitte Cyprus Tax Guides, 2024.
- ↑ Republic of Cyprus, Ministry of Finance, "Double Tax Treaties", mof.gov.cy, 2025.
- ↑ KPMG, "Cyprus Tax Guide 2025", KPMG Cyprus, 2025.
- ↑ Cyprus Tax Life, "Cyprus Non-Dom Tax Status: Complete Guide", cyprustaxlife.com, 2026.
- ↑ EY, "Cyprus Non-Domicile Rules", EY Cyprus Tax Guide, 2024.
- ↑ Cyprus Tax Life, "The 60-Day Tax Residency Rule in Cyprus", cyprustaxlife.com, 2026.
- ↑ Deloitte, "Cyprus 60-Day Rule for Tax Residency", Deloitte Cyprus, 2024.
- ↑ Cyprus Tax Life, "Dividend Tax in Cyprus: SDC and Non-Dom Exemption", cyprustaxlife.com, 2026.
- ↑ Republic of Cyprus, Tax Department, "VAT Rates", taxisnet.mof.gov.cy, 2025.
- ↑ PwC, "Capital Gains Tax in Cyprus", PwC Cyprus, 2025.
- ↑ European Commission, "Cyprus - Taxation", ec.europa.eu, 2025.