Personal Tax in Cyprus – Introduction
Cyprus has carved out a strong reputation among internationally mobile individuals – not just for its climate and lifestyle, but also for its simple and tax-efficient personal tax regime.
With moderate income tax rates, a generous non-domicile regime, and no wealth or inheritance taxes, the island remains an attractive base for entrepreneurs, professionals, and retirees alike.
Who Pays Tax in Cyprus?
Cyprus taxes individuals on their worldwide income once they become tax resident.
The standard rule is based on 183 days of physical presence in a calendar year.
However, there is also a 60-day tax residency rule for those who don’t have tax residency elsewhere, provided certain conditions are met (e.g., owning or renting a home in Cyprus and having business or employment ties here).
Income Tax Rates and Reliefs
The Cyprus income tax system is progressive:
- 0% on the first €19,500
- Then rising through 20%, 25%, and 30%, with a top rate of 35% above €60,000
This structure delivers relatively low effective tax rates, especially when compared with Western Europe.
The tax-free threshold is one of the highest in the EU and is due to increase to €20,500 as part of upcoming reforms.
There are also specific incentives for newcomers, including:
- A 50% exemption on employment income over €55,000, available to individuals relocating to Cyprus. This can apply for up to 10 years.
- A 20% exemption (capped at €8,550 per year) for other qualifying employees, though this is being phased out.
These measures are designed to make Cyprus appealing to internationally mobile professionals and business owners considering relocation.
Non-Domiciled Status and Passive Income
Perhaps the most powerful personal tax advantage available in Cyprus is the non-domicile regime.
A person who becomes a Cyprus tax resident, but is not domiciled in Cyprus, is exempt from tax on dividends and interest income– both from Cyprus and abroad.
This regime lasts for up to 17 years and also applies to most types of foreign capital gains (e.g., share sales), although gains on Cyprus real estate remain taxable.
Crucially, this means a non-domiciled tax resident of Cyprus can potentially live tax-free on investment income while remaining within the EU, and under a tax regime that is fully compliant with international standards.
Other Considerations
- Foreign pensions can be taxed under a special regime at just 5% on income above €3,420 per year. Alternatively, the standard income tax bands can be used if more favourable.
- Cyprus has no wealth tax, no gift tax, and no inheritance tax.
- There is a social insurance system and a national health scheme (GESY), both funded by moderate, capped contributions from employment and self-employment income.
Personal Tax in Cyprus – Conclusion
For those looking to base themselves in a stable, English-speaking EU country, Cyprus offers a very appealing personal tax profile.
From income tax incentives to the non-domicile regime and a complete absence of wealth and inheritance taxes, the structure is simple, credible, and tax-efficient.
Final thoughts
If you have any queries regarding this article on Personal Tax in Cyprus, or any other Cypriot tax matters, then please get in touch.