IMPORTANT NOTICE
The first point I’d like to make is that I’m not a qualified tax adviser and as such this information is meant as a guide only. If you are serious about relocating to Cyprus then I’d seek out proper tax advice from a qualified adviser.
This post is about the benefits that I looked into and what I understand the status to be.
Why we decided to relocate
Moving to Cyprus offers a range of tax benefits that make it an attractive destination for expatriates, retirees, and high-net-worth individuals.
When I lived in the UK, may wife and I both had well-paid jobs and our joint self-assessment tax bill was in the region of £75K per year. We also had two businesses that were paying VAT and annual corporation tax at 20%, which amounted to a further £50K.
So, our annual tax revenue generated for the UK government (excluded what we generated in VAT) was well over £120K a year.
To be honest, I’ve not minded paying my fair share of tax, but both of us were paying over half our income in tax. What is the point of trying to do well for yourself and your family when the tax rate is that high?
So, we heard that Cyprus had some significant tax advantages. We heard about this from a work colleague and we checked it out with a tax adviser.
Tax wasn’t the only reason we decided to move, let’s face it, the UK isn’t what it was. The weather was also a major factor.
What are the tax benefits?
Here’s an overview of the key advantages:
Residency & Non-Domicile (Non-Dom) Status
To benefit from Cyprus’s favorable tax regime, individuals can establish tax residency by spending over 183 days in the country annually or by meeting specific criteria under the 60-day rule. Once a tax resident, applying for Non-Domicile (Non-Dom) status can provide significant tax exemptions:tax.com.cy+1Global Citizen Solutions+1Expatra+3Polycarpos Philippou+3CBN+3
Dividend and Interest Income: Exempt from taxation for Non-Dom residents. Cyprus Citizenship by Investment
Capital Gains: Generally, no capital gains tax, except on gains from the sale of immovable property located in Cyprus. Global Citizen Solutions+1Polycarpos Philippou+1
Inheritance Tax: Cyprus does not impose inheritance or estate taxes. Polycarpos Philippou
Employment Income Tax Exemptions
Cyprus offers substantial income tax exemptions to attract foreign professionals: Global Citizen Solutions+2finhub.com.cy+2Experts for Expats+2
50% Exemption: Available for individuals earning over €55,000 annually who were non-residents for at least 15 consecutive years prior to employment in Cyprus. This exemption applies for 17 years from the commencement of employment. IBCCS TAX LTD+1pavlaw.com+1
20% Exemption: Applicable to individuals earning less than €100,000 annually, offering a 20% deduction on employment income. BDO
Pension Income Taxation
Retirees can choose between two taxation methods for foreign pension income.
Flat Rate: 5% tax on pension income exceeding €3,420 annually. Expatra+1Chase Buchanan+1
Progressive Rates: Taxed under the standard income tax brackets, which may be beneficial depending on total income. Chase Buchanan
Corporate and Investment Incentives
Corporate Tax Rate: A flat 12.5%, one of the lowest in the EU. cyprusvisa.com.cy+1Cyprus Citizenship by Investment+1
Double Tax Treaties: Cyprus has an extensive network of treaties with over 60 countries, preventing double taxation on income. tax.com.cy
Property and VAT Benefits
Reduced VAT: A reduced VAT rate of 5% applies to the purchase of a primary residence, compared to the standard 19%. Cyprus Citizenship by Investment
No Annual Property Tax: Property owners pay only a municipal fee, as there is no annual property tax in Cyprus. Cyprus Citizenship by Investment
Summary of Key Tax Benefits
| Benefit | Details |
|---|---|
| Non-Dom Status | Exemption from tax on dividends and interest income |
| Capital Gains Tax | No tax, except on Cypriot immovable property sales |
| Inheritance Tax | None |
| Employment Income Exemptions | 50% exemption for salaries over €55,000; 20% for lower incomes |
| Pension Income | Choice between 5% flat rate or progressive tax rates |
| Corporate Tax | 12.5% flat rate |
| Double Tax Treaties | Agreements with over 60 countries to avoid double taxation |
| Property VAT | Reduced rate of 5% for primary residences |
| Annual Property Tax | None; only a municipal fee is applicable |
What about business owners?
So, we found out that Directors of limited companies can take their drawings tax free in Cyprus.
Wow! That’s a huge tax saving, one that made the decision to move here a ‘no brainer’ as they say :-).
Well, this is my assessment of why Cyprus offers a great deal on tax. But, don’t take my word for it, find out from a professional.
