Cyprus used to be the jurisdiction of choice for entrepreneurs willing to establish businesses to protect assets and intellectual property while benefiting from the advantages of a non-resident company and its non-domicile taxation. Under the newly adopted regulations, however, every Cyprus company is required to meet specific criteria, ensuring economic substance, a physical office, and the appointment of a secretary and manager within Cyprus.
Even though Cyprus has lost its tax haven status due to EU membership, it still offers enticing tax benefits. The notable surge in new Cyprus companies, from 1,000 to 6,000 in H1 2023, underscores the appeal of Cyprus’ tax policies and is a substantial draw for businesses.
Insights into Cyprus income tax in 2024
Income tax, a cornerstone for both individuals and companies, plays a pivotal role in Cyprus. For the tax year 2023, individuals residing in Cyprus were subject to income tax on their global earnings, irrespective of the income source or payment location. Non-residents, at the same time, were only taxed on income derived within Cyprus. Personal income tax rates in Cyprus for 2023 exhibited a progressive structure, ranging from 0% to 35%, depending on income levels.
Similarly, companies resident in Cyprus faced corporate income tax on their worldwide earnings, whereas non-resident companies were taxed solely on income originating within Cyprus. Notably, the jurisdiction boasted one of the lowest corporate income tax rates globally, set at 12.5% in 2023, which greatly contributed to its allure for businesses seeking favorable tax environments. For more information on Cyprus income tax rates, please consult a qualified tax expert.
Cyprus taxation beyond income tax challenges
Beyond income tax, individuals and businesses in Cyprus may encounter other taxes, including the special defense contribution, general health system contribution, capital gains tax, and immovable property tax. Each of them makes the overall tax framework more complicated, which explains the need for a proper understanding of the system, combined with effective financial planning.
Comparative analysis with other European jurisdictions
A comparative analysis of income tax rates across major European jurisdictions for 2023 sheds light on Cyprus’s competitive edge. The below table reveals that Cyprus maintained a distinctive advantage:
| Jurisdiction | Personal Income Tax Rate (%) | Corporate Income Tax Rate (%) |
| Cyprus | 0-35 | 12.5 |
| Austria | 0-55 | 25 |
| Belgium | 25-50 | 25 |
| Denmark | 55.9 | 22 |
| … | … | … |
Cyprus VAT: rates and exemptions in 2024
Value Added Tax (VAT) is basically a consumption tax in Cyprus, impacting the supply of goods and services, as well as the import and acquisition of goods from other EU member states. As of 2023, the standard VAT rate stood at 19% and applied to a wide array of goods and services. However, in Cyprus, you could also encounter reduced VAT rates of 9%, 5%, and 0%, specifically applicable to certain categories like accommodation, water, books, and exports.
For a more nuanced understanding, some goods and services fell under VAT exemptions. Notable examples included education, health, and financial services. The application of these rates and exemptions ensured a diversified and nuanced approach to VAT in Cyprus.
Property taxation in Cyprus: a dual-component overview
In Cyprus, property taxes are applied to owners of immovable property, i.e., land, buildings, and structures, whether situated within the country or abroad. The taxation structure in this particular case consists of two primary components: the immovable property tax and the municipal tax.
The immovable property tax calculation is contingent on the property’s market value as of January 1, 1980. The tax rate spans from 0.6% to 1.9%, determined by the property’s assessed value. Payment of the immovable property tax is required by the end of each September. Certain exemptions exist, with public buildings and agriculturally used land among them.
Complementing the immovable property tax is the municipal tax enforced by local authorities. The municipal tax varies, ranging from EUR 55 to EUR 195, depending on the property’s area. Property owners have the option to pay the municipal tax annually or semi-annually. This dual-tiered property tax system guarantees a comprehensive approach to property taxation in Cyprus, with the intricacies of each tax contributing to the overall fiscal landscape for property owners.
Property transfer tax
Property transfer tax in Cyprus is a financial obligation borne by the buyer of a property and determined by the property’s market value at the time of the transfer. The property transfer tax rates for the fiscal year 2023 are structured as follows:
- 3%: Applicable to property values up to EUR 85,000
- 5%: Imposed on property values ranging from EUR 85,001 to EUR 170,000
- 8%: Applicable to property values exceeding EUR 170,000
Buyers are required to settle the property transfer tax within six months from the date of contract registration at the Department of Lands and Surveys. NB: Certain exemptions and reductions may come into play, benefiting specific groups. First-time buyers, family transfers, and properties on which VAT has been paid may qualify for them.
Cyprus’s competitive advantages
Examining the above data, it becomes evident that Cyprus offers compelling tax advantages in comparison to other European jurisdictions:
- Low and Flat Corporate Tax Rate: Cyprus boasts a 12.5% corporate income tax rate, the lowest among EU member states and below the OECD average. This significantly reduces the tax burden and enhances after-tax profits for companies operating in Cyprus.
- Progressive Personal Income Tax Rates: Cyprus maintains lower rates that range from 0% to 35% compared to many European counterparts, particularly benefiting higher income brackets and bolstering disposable income.
- Flexible Tax Residency Criteria: Cyprus’s accommodating criteria for tax residency, including the so-called 60-day rule for individuals and management, as well as control for companies, allow entities of various backgrounds to benefit from the favorable tax regime.
- Extensive Double Taxation Treaties: With over 60 countries, Cyprus’s network of double taxation treaties minimizes tax liabilities and risks, facilitating investments and cross-border fund flows.
- EU Directive Compliance: Cyprus follows EU directives on taxation, including, inter alia, the Parent-Subsidiary, Interest and Royalties, and Merger Directives, which streamline cross-border transactions within the EU and provide tax benefits and exemptions.
Do you need help with tax optimization, offshore company registration, or relocating your business to a safe tax haven? This is easy! Simply contact International Wealth experts for a personal consultation today.
