Cyprus has one of the most attractive onshore tax regimes in the EU, and is considered a prime location for business relocation.

Becoming a Cypriot citizen does not make you liable to any kind of taxes. To be a Cypriot tax resident you must spend more than 183 days a year in the country.

Tax residents in Cyprus are subject to personal income tax on their worldwide income. Rates are progressive up to 35% for annual income in excess of €60,000. Capital gains, other than those relating to Cyprus-located immovable property, are tax-exempt. Rental income is subject to tax at standard rates, although 20% of the gross rental income for rental of buildings is tax exempt.

Dividend and interest income are not subject to personal income tax, although individuals both residents and domiciled in Cyprus for tax purposes are subject to the Special Defence Contribution (SDC), which taxes dividends at a flat rate of 17% and interest at 30%. SDC also taxes rental income at an effective 2.25% tax rate.

Profits from disposals of shares, bonds, debentures, founders’ shares, and other titles of companies or other legal persons incorporated in Cyprus or abroad and options thereon, are unconditionally exempt from income tax.

Capital Gains accrued by individuals on the disposal of immovable property are subject to a capital gains tax of 20%. A minimum exempted applies to capital gains from the disposal of private residence, agricultural land by a farmer, gifts between spouses, children and third degree relatives, family companies, gifts to charities, exchange of properties, among others. Capital Gains from the disposal of shares in companies that own Cyprus-situated immovable property, when at least 50% of market value of the shares derives from immovable property, are subject to capital gains tax.

The standard VAT rate in Cyprus is 19%. Reduced rates of 9% and 5% apply to certain goods and services.

There are no net wealth, inheritance and estate duties in Cyprus. There is a stamp duty on all documents related to property.

On corporate taxation, Cyprus has one of the lowest tax rates in the European Union. Resident companies are taxed on their worldwide income at a corporate tax rate of 12.5%.

Dividends received are usually not subject to taxation. Capital Gains derived from the sales of shares are tax-exempt, those from immovable property may be taxed at a 20% rate.

In addition, under the intellectual property (IP) regime, 80% of the net profit for the exploitation of intellectual property may be tax-exempt.

As of April 5, 2019, the Cypriot House of Representatives adopted a new implementing the provisions of the European Union (EU) Anti-Tax Avoidance Directive (ATAD). This introduces new rules on Controlled Foreign Corporations (CFCs), limits on the deductibility of exceeding borrowing costs and interest limitation rules that were previously absent.

There are no withholding taxes in Cyprus on payments on dividends and interests.

Due to this favorable tax regime, Cyprus is the gateway to the European common market chosen by many non-EU companies and a portal for investment from the West into Russia, Middle-east, Asia and South America. Learn more about Cyprus' corporate taxation, legal framework and tax treaties at incorporations.io/Cyprus.

This should not be construed as tax advice. Flag Theory | Passports.IO has access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circumstances. Contact us for further information.