Cyprus has been positioned as an ideal location for establishing business by providing high quality of living, business friendly environment, attractive tax incentives, low cost of setting up and running of business, comparing to other EU jurisdictions, providing the simplicity of common law and also having the ability to provide businesses with highly educated and skilled workforce.

Moreover, Cyprus can provide accessibility to Europe, and the growing markets of Middle East and Gulf countries. The island has also become a very reputable jurisdiction in financial services industry, having expanded the last couple of years in the funds industry by harmonizing its legislation with the EU Directives. The above features, combined with the reliable legal system based on UK common law and the tax incentives offered, have played an important role in the development of Cyprus as a business hub for IT companies which have chosen to relocate their headquarters and regional offices in Cyprus. Lastly, Cyprus was evolved as a favorable holding jurisdiction where M&A transactions can efficiently and reliably be concluded.

Some basic rules of Cyprus tax system and also details for the favorable IP Box Regime are presented below.

Basic Tax rules:

• Corporation tax:
• Flat rate5% corporation tax
• Exemptions:
  • Dividend income
  • Profit from sale of securities
  • Gains relating to foreign exchange differences (forex) with the exception of forex arising from trading in foreign currencies and related derivatives.
  • Royalty income, embedded income and other qualifying income derived from qualifying intangible assets in the ‘new’ Cyprus intellectual property (IP) box - 80% (see IP BOX REGIME) of the net profit as calculated using the modified nexus fraction

• Taxation on Dividend and Interest income
• No Withholding taxes on dividends and interests
• No Taxes on Dividends to Non-Cyprus tax residents and for Cyprus tax residents non-domicile* will only pay 2.65% for National Health System contributions in the maximum income of €180,000
  • *Non-Domiciled are considered the Foreigners who relocated to Cyprus but have not been Cyprus for more than 17 years the last 20 years

• Tax Residency

An individual is tax resident in Cyprus if (s)he spends in Cyprus more than 183 days in any one calendar year. With effect as from 1 January 2017, an individual may also be considered tax resident in Cyprus if (s)he satisfies the “60 day rule”.

The “60 day rule” applies to individuals who in the relevant tax year:

1. do not reside in any other single state for a period exceeding 183 days in aggregate, and
2. are not considered tax resident by any other state, and
3. reside in Cyprus for at least 60 days

• Capital Gains tax:
• 20% (applies only in the sale of property situated in Cyprus, or sale of shares of a company which owns property situated in Cyprus) BUT,
• No Capital Gains tax on the below:
  • Sale of corporate titles and other financial instruments
  • Sale of immovable property situated outside Cyprus

• Personal Income tax:

All Cyprus tax resident individuals are taxed on all chargeable income (including certain employment benefits) accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.

• Exemptions:

1. No income tax on Dividends
2. No income tax on Interest received
3. Profits from the sale of securities
4. Capital sums accruing to individuals from any payments to approved funds (e.g. provident funds).
5. 50% exemption on gross salary to individuals who take up first employment in Cyprus and were not residents of Cyprus for a period of at least 10 consecutive years prior to the commencement of their employment, provided their salary exceeds the amount of €55.000. The exemption is granted for 17 years, starting from the tax year of employment in Cyprus.
6. 20% exemption on gross salary to, individuals who take up first employment in Cyprus and were not residents of Cyprus for a period of at least 3 consecutive years prior to the commencement of their employment and were employed outside of Cyprus by a non-resident employer, will be eligible for the exemption of 20% (or €8.550, whichever is the lower). The amended exemption will be granted for 7 years, starting from the tax year following the year of employment in Cyprus

Tax Rates