How to pay income tax in Cyprus

tax in Cyprus
Updated 2019-02-25 09:01

Cyprus has a reputation for being a tax haven. And rightly so, as the country offers one of the most attractive tax regimes in all of EU. Cyprus has very low corporate taxes, high-income tax threshold, no capital gains tax on shares, tax-free interest for up to 17 years and a vast network of double taxation treaties. As a result, apart from the many expats who chose Cyprus as their new home, there are also many holding companies opting to set up their international base in the country.

How the system works

If you spend more than 183 days of a calendar year in Cyprus, regardless of whether you are a citizen or not, you are required to pay taxes. Companies which accrue profit in Cyprus must pay taxes for any income accrued in Cyprus regardless of whether they are tax residents in the country or have their base elsewhere.

Good to know:

Cyprus has a double taxation treaty with more than 60 countries, which offers significant tax advantages to taxpayers. You can find the full list of countries here.

The way taxation works differ depending on whether you are an employee or a self-employed individual. For employees, the tax is withheld at the base from the employer, whereas self-employed individuals pay their taxes through Cyprus' self-assessment and provisional systems. The dates for filing your tax returns are different as well: employees must fill by 30 April and self-employed individuals by 30 June (or 31 December, if they also need to file audited accounts).

Good to know:

You can file your taxes electronically, via the Taxisnet website.

Tax rates and tax types

Cyprus has a very high threshold of non-taxable income. Any earnings up to 19,500 euros are tax-exempt ' considering the low cost of living, this secures a good quality of life for Cyprus residents. For income between 19,501 euros and 28,000 euros, the tax rate is 20%, gradually rising to 35% for income over 60,001.

Good to know:

As Cyprus is a trendy destination for retiring expats, there is beneficial legislation when it comes to foreign pensions. The tax rate for foreign pensions is 5%, with the first 3,417 euros being tax exempt.

Apart from income tax, there is also a Value Added Tax (VAT) of 19% on all goods and services in Cyprus. This 19% is flat; there are no 'low VAT rate' goods or services in Cyprus as there are in other countries. However, some goods and services are tax-free. There is also no capital gains tax (for the selling of shares) or inheritance tax.

Good to know:

Given the island's unique condition of being divided in two, with half of it under Turkish occupation, there is a special contribution for defence purposes applied on top of taxes. However, this is only applicable to Cyprus residents who have been living on the island for more than 17 years.

Useful links:

Cyprus Tax Department

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.