Cyprus Tax Regime Highlights
Corporation Tax
Cyprus has a corporate income tax (CIT) rate of 15%.
Corporate tax residence
A company which is tax resident in the Republic is taxed on income accruing or arising from sources both within and outside the Republic.
A company which is not tax resident in the Republic is taxed on income accruing or arising only from sources within the Republic. The definition of a Cyprus tax resident company has been extended to also include companies which have been incorporated under the Cyprus Companies Law, irrespective of whether another country also considers them as tax resident in that country (except for companies deemed as tax residents of another country by reference to an applicable double tax treaty).
Personal Income Tax
From 2026 deductions have been introduced for children, students, housing, green transition (depending on family income).
Tax residency for individuals
An individual is resident for tax purposes of Cyprus if (s)he is physically present in Cyprus for a period or periods exceeding in aggregate 183 days during the 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:
- do not reside in any other single state for a period exceeding 183 days in aggregate, and
- reside in Cyprus for at least 60 days, and
- carry out business in Cyprus and/ or employed in Cyprus and/or hold an office (Director) of a company tax resident in Cyprus.
Also, must maintain a permanent residential property in Cyprus, rented or owned by the individual.
Non- Dom Status
On 16th July 2015, the Cyprus Government introduced the “Domicile” concept through an amendment to the Special Contribution for Defence (SDC) Law of 2002.
The new “non-Dom” rules provide that individuals who are tax residents but not domiciled in Cyprus, as per the requirements set out in the relevant legislation, would be exempted from payment of the SDC tax on dividends/interest. This exemption will apply to income even if derived from sources within Cyprus.
Advantages:
- Non-Dom earning dividend income, from foreign as well as local investments will not be subject to SDC
- Non-Dom earning interest income, from foreign as well as local sources, will not be subject to SDC
Employment income exemptions
50% of the remuneration
Remuneration for “first employment” exercised in Cyprus commencing as from 1 January 2022 with remuneration exceeding EUR 55.000 by individuals who were not residents of Cyprus for a period of 15 consecutive tax years immediately prior to the year of commencement of the employment in Cyprus.
The exemption will apply once in a person’s lifetime for a period of 17 years.
20% of the remuneration with a maximum amount of €8.550 annually
Remuneration for first employment exercised in Cyprus commencing after 26 July 2022, by individuals who immediately prior to the commencement of their employment in Cyprus:
- were not residents of Cyprus for a period of at least 3 consecutive tax years
- were employed outside of Cyprus by a non-resident employer.
Exemption applies for a period of 7 years, starting from the tax year following the tax year of commencement of employment.
Individuals allowed 50% exemption will not be eligible for 20% exemption
Lifetime Capital Gains Tax Exemptions
- General exemption for a natural person: EUR 30k
- Agricultural land exemption: EUR 50k
- Primary residence exemption: EUR 150k
Dividend income
Dividends received by individuals
Special Defence Contribution (SDC) rate of 5% on gross dividends received.
Dividends received from Cyprus tax resident companies out of profits earned up to 31 December 2025 taxed at 17% if the dividend is received on or before 31 December 2031.
These rates apply to Cyprus tax resident individuals receiving dividends from:
- Cyprus tax resident companies, and
- non-Cyprus tax resident companies
Does not apply to individual benefiting from the non-domiciled (non-dom) regime, in which case the dividends are not taxable.
The concept of disguised dividends is introduced for direct and indirect shareholders who are natural persons. A tax rate of 10% applies on the disguised dividend (double the normal 5% SDC rate on dividends).
Dividends paid by Cyprus tax resident companies to non-Cyprus tax resident companies remain not subject to any Cyprus withholding tax (WHT) unless they fall within low taxed jurisdictions (LTJs) or blacklisted jurisdictions (BLJs) provisions.
Withholding tax on dividends paid to low taxed jurisdictions (LTJs) is reduced to 5% while it remains at 17% for dividends paid to blacklisted jurisdictions (BLJs).
In the case of Dividend income from non -Cyprus resident companies, these are generally exempt from taxation however if not exempt then will be subject to 5% tax.
Foreign dividends are not exempt when:
- more than 50% of the paying company’s activities result directly or indirectly in investment income and
- the foreign tax is less than 50% of the Cyprus tax burden Cyprus
Interest Income
Interest income received by Cyprus tax resident companies
Such interest income is generally subject to CIT (within some exemptions).
Interest income received by individuals
Such interest income is generally subject to SDC at the rate of 17% on the gross amount of the interest received/credited (with some exceptions).
This does not apply to individual that benefits from the non-dom regime, in which case the interest is not taxable.
Notional interest deduction (NID) on corporate equity
Equity introduced to a Cyprus tax resident company post 31 December 2014 (‘new equity’) in the form of paid-up share capital or share premium may be eligible for an annual NID for tax purposes.
New equity may be contributed to cash or assets in kind. The NID is a tax-allowable deduction (Calculated as: New equity x NID interest rate) against the company’s taxable profits, however, cannot exceed 80% of the taxable profit generated by the activities financed by the new equity (as calculated prior to the NID).
Income from intellectual property (IP)
The Cyprus IP regime enables IP companies to achieve a low effective tax rate by providing exemptions from tax on income related to IP.
80% of the “Qualifying Profits” generated from “Qualifying Assets” is deducted for tax purposes, reducing the effective tax rate on IP assets to as low as 2.5%.
Foreign exchange differences
Gains relating to foreign exchange differences are exempt from corporation tax, with the exemption of forex arising from trading in foreign currencies.
Profits from foreign permanent establishment
Profits of a permanent establishment maintained abroad are generally exempt from tax in Cyprus.
The exemption of foreign permanent establishment profits does not apply in case where the foreign permanent establishment is situated in a blacklisted jurisdiction.
Tonnage Tax
The Merchant Shipping Legislation provides exemption from all direct taxes.
Qualifying shipowners, charterers and shipmanagers, from the operation of qualifying ships in qualifying activities are allowed to be taxed under the Tonnage Tax (TT) regime.
Merchant Shipping Legislation provides for the payment of TT on the net tonnage of the vessels and is regulated completely by the Department of Merchant Shipping rather than the Tax Authorities.
Allows also mixed activities (shipping subject to TT and other subject to corporation tax) within a company/group.
Exemption is also given in relation to the salaries of officers and crew aboard a Cyprus ship.
The application of the tonnage tax system is compulsory for owners of Cyprus flag ships and optional for owners of non-Cyprus flag ships, charterers and shipmanagers.