Lawyer
Expert in corporate and international corporate law. Has extensive experience in supporting the acquisition of financial licenses in Ukraine, as well as business incorporation in the EU, the United Kingdom, Switzerland, the UAE, and key Asian jurisdictions.
Tax system in Cyprus
The tax system in Cyprus was known his own attraction for many foreign investors and companies. That is why there are many who call Oh really jurisdiction tax harbor.
Who are such non-residents and residents?
Foreigners who have lived in the country for more than 183 days, usually become her tax residents: they pay and receive tax benefits. The government of Cyprus simplified this rule: people who want to become tax residents of Cyprus can live in Cyprus for 60 days for the tax year instead of 183.
The 60-day rule provides four requirements:
- Do not live anywhere else other than the country longer than 183 days.
- Not to be a tax resident of other countries during the tax period.
- To conduct any activity in Cyprus, for example, to be an employee in a Cypriot company companies
- Own residential real estate in Cyprus
Cyprus provides its own citizens and foreigners with wonderful tax policies and incentives. To become a tax resident, non-residents can have permanent place residence by investing in real estate or funds. the company you can consider tax resident if it is managed or controlled from Cyprus.
What are the taxes in Cyprus?
Here are a few key features of this system, however, trace keeps in mind that regulations can change over time, and it is important to consult with a tax specialist or local authorities to receive the freshest information:
- Income tax: The income tax rate in Cyprus for resident companies is 15%, one of the lowest in Europe. Non-taxable residents do not pay this tax. In addition, you can use the avoidance system of double taxation and enter into avoidance agreements of double taxation with other countries. For pensioners a special regime: 5% from pension payments if they exceed 3420 euros per month.
- Tax on dividends: the entire amount of dividends is released from tax for subsidiaries companies that are controlled motherly by a company from the EU or the country with which Cyprus has an avoidance agreement double taxation. There is also a 17 % dividend tax for other companies. Cyprus, as a rule, does not charge dividend tax that is paid to non-residents.
- Personal income tax persons: is levied on income over 19,500 euros per year. However, for residents of Cyprus, whose income is received from sources outside the country, there is a Non-Domicile status, which allows them not to pay tax on income received outside Cyprus.
- Added tax cost (VAT): The VAT rate in Cyprus is 19%, but for some goods and services it can be reduced to 5% or released.
Who has to pay income tax in Cyprus?
The taxation system of Cyprus obligates tax residents to pay certain set taxes, including income tax on everything world, regardless of resident status. A person who is not a tax resident is concerned only with income derived from sources in Cyprus.
Taxation physical persons
Tax residents of Cyprus should pay general and foreign taxes on their incomes in everything world at rates of 20-35%, depending on their annual income
Range of taxable income – Tax
- from €0 to €19,500 – 0%
- from €19,500 to €28,000 – 20%
- from €28,001 to €36,300 – 25%
- from €36,301 to €60,000 – 30%
- €60,000 – 35%
What are the rates of VAT cost?
VAT is charged on the supply of services and goods in Cyprus, imports of goods to Cyprus, and acquisition of goods from the EU. The standard VAT rate is 19%. Cyprus also has reduced the VAT rate by 9% for restaurants, services food, hotel business, and other services.
A reduced VAT rate of 5% applies to services in the industry reconstruction and repair of real estate.
Cyprus’s attractive jurisdiction to conduct business is like the availability network tax avoidance agreements double taxation with many countries and tax benefits.
In Cyprus exist different tax benefits and incentives for investors and enterprises. For example, investment funds can use certain tax benefits.
In order to save on taxes, you must properly organize your business in Cyprus, for example, to create a holding structure or use tax residency for their own employees. Also should be informed of the last one’s changes in the tax system legislation, which can affect your situation.
Given the specifics of your situation and wishes purposes, it is recommended to contact a legal consultant who will provide specific information and advice on taxation in Cyprus and your business.
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The corporate tax rate in Cyprus was raised to 15%. Doesn't this create problems for Ukrainian business?
On the contrary, it is a strategic advantage. The Tax Code of Ukraine provides for exemption from CFC taxation if the effective rate in the foreign jurisdiction is at least 13%. The 15% rate in Cyprus automatically allows legally exempting the profit of a Cyprus company from additional taxation in Ukraine.
How does the updated IP Box regime for IT companies work?
The Cyprus IP Box applies the Modified Nexus Approach, where the benefit depends on actual development costs. If a company develops software locally, 80% of qualifying profit is exempt from taxes. The 15% corporate tax applies only to the remaining 20% of profit, giving an effective tax rate of 3%.
Is it necessary to pay tax on undistributed profit and the annual company levy?
No. The Deemed Dividend Distribution (DDD) rule was completely abolished for profits generated from January 1, 2026. The annual fixed Annual Levy of €350 was also abolished starting in 2024.
Can I get Cyprus tax residency as a business founder?
Yes, the “60-day rule” applies to business founders. It allows you to obtain tax resident status by staying in Cyprus for only 60 days a year if you own or rent housing, have business ties to the country, and are not a tax resident of another state.
What is Notional Interest Deduction (NID) and who is it suitable for?
NID is a powerful incentive for capital-intensive businesses (e.g., industrial or investment holdings). It allows deducting notional interest on the amount of new equity capital introduced from the taxable base. The deduction amount equals the yield of 10-year government bonds of the country of investment plus 5%. This tool can reduce taxable profit by up to 80%.
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