Tax Treaties

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Taxation of trusts

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Taxation of Shipmanagement/Shipowners

Profits from Shipping Activities

The following are exempt from taxation in accordance with the provisions of the Merchant Shipping (Fees and Taxing Provisions) Law and are subject to tonnage tax:

  • The income of a qualifying ship-owner from the operation of a qualifying Cyprus, community and/or foreign ship (under conditions), in a qualifying shipping activity.
  • The income of a qualifying charterer from the operation of a qualifying Cyprus, community and/or foreign ship (under conditions), in a qualifying shipping activity.
  • The income of a qualifying ship operator from the provision of ship management services of the crew and/or technical administration services.
  • Dividends paid directly or indirectly from the profits mentioned above.
  • Salaries or other benefits paid to the masters, officers and the crew of a qualifying Cyprus or Community flag ship in a qualifying shipping activity.

For the purposes of the above-mentioned Law, in the case of a Cyprus ship, the term “ship-owner” also includes the bareboat charterer.

Capital gains tax

Capital Gains Tax is levied on gains from the disposal of immovable property or shares in a company which owns immovable property at the rate of 20%. If the property was acquired before 1.1.1980 the cost is deemed to be its market value as at 1.1.1980. A cost adjustment is allowed based on the increase in the R.P.I. between the date of purchase (or 1.1.1980 if earlier) and the date of sale. Lifetime gains arising on disposal of immovable property by individuals are exempt as follows:

  • €30.000 on disposal of any property
  • €50.000 on disposal of agricultural land
  • €150.000 on disposal of a residence
No capital gains tax is levied on immovable property sold abroad.

Value added tax

Standard rate (goods and services) 19%
Reduce rate (hotels, restaurants etc) 9%
Acquisition/construction of Residence 5%
Reduce rate (newspapers, books, animal food, food supplies, medicines etc.) 3%
Basic goods 0%
Financing insurance services etc Exempted

Defence Tax

Residents of Cyprus are liable to Defence Tax of the following incomes:

%
Dividend Income to Cyprus Tax residents 17
Bank interest 17
Other non trading interst 17
Gross rental income less 25% 3
Interest from Cyprus government saving bonds and  developments bonds and interest earned by provident fund 3
Interest earned by Social Insurance fund 3

* Tax Residents of Cyprus

Up to 2016 tax year, an individual is considered to be tax resident in Cyprus if he was in Cyprus for more than 183 days in any calendar year.

Effective from 1.1.2017, an individual can be considered as tax resident in Cyprus if he spends at least 60 days in Cyprus provided that the individual:

  1. a) do not reside on any other country for more than 183 days, and
    b) are not tax resident in any other country, and
    c) have other defined Cyprus ties. To satisfy this condition the individual must
    carry business in Cyprus and/or
    ii. be employed in Cyprus and/or
    iii. hold an office of a Cyprus tax resident company (i.e. director), provided that is not terminated during the tax year
    iv. Further the individual must maintain permanent residence in Cyprus, either owned or rented

The previous “183 day rule” is also maintained so that an individual staying in Cyprus for more than 183 days in a year is automatically tax resident in Cyprus

Cyprus tax resident individuals either under the “60 day rule” or “183 day rule” are subject to taxation in Cyprus on their worldwide income.

In addition, Cyprus tax resident individuals who are Non- Domiciled in Cyprus are exempt from taxation on dividend income earned worldwide and on passive interest income.

Taxation of employees

No taxation on emoluments earned abroad

SPECIAL CONTRIBUTION

Employees are subject to income tax on the following tax rates:

        Cumulative
  Income

€

 Rate

%

 Tax

€

 Income

€

 Tax

€
First 22.000 0 0 22.000 0
Next 10.000 20 2.000 32.000 2.000
Next 10.000 25 2.500 42.000 4.500
Next 30.000 30 9.000 72.000 13.500
Over 72.000 35

Personal Tax Deductions

Income criteria for granting the new personal deductions

(A) Families

The total gross family income must not exceed the following limits:

  • €100.000 for families without children or with one (1) or two (2) children

  • €150.000 for families with three (3) or four (4) children

  • €200.000 for families with five (5) or more children

Single-parent families

The same income criteria also apply to single-parent families.

(B) Single persons

For single individuals, meaning persons who live without dependent children or a spouse or civil partner, their total gross income must not exceed €40,000.

Note that individuals who live or cohabit with other persons, other than those mentioned above, are still considered single persons.

Deduction for dependent children

The deduction for dependent children is granted to each biological or adoptive parent, for each dependent child, who is a biological or legally adopted child, as follows:

  • €1.000 for the first dependent child

  • €1.250 for the second dependent child

  • €1.500 for the third and each additional dependent child

A dependent child, for whom a parent may receive a deduction, is considered a biological or legally adopted child who on 31 December of the tax year is:

  • Under 18 years old

  • A secondary education student under 20

  • A soldier serving in the National Guard under 21

  • A university student under 24

  • A child permanently incapable of self-support, regardless of age

Housing and other deductions

Based on the income criteria determined according to the number of children in the family, a deduction of up to €2,000 is granted to each:

  • spouse,

  • civil partner,

  • partner without civil union but with a common child, or

  • single individual

for:

  • Interest paid on a serviced housing loan for the purchase or construction of a main residence in Cyprus.
    A serviced loan also includes a restructured loan where installments are paid regularly up to 31 December of the tax year.

  • Rent paid for the use of a main residence in Cyprus.

Based on the same income criteria (depending on the number of children), a deduction of up to €1,000 is granted for:

  • Energy upgrading of the main residence, or

  • Purchase of a new electric vehicle.

Other deductions

  • Deduction without income criteria for home insurance against natural disasters, up to a total amount of €500 for all residences.

  • Life insurance premiums are allowed provided they do not exceed 7% of the insured amount.

  • Contributions to:

    • life insurance

    • social insurance

    • pensions

    • provident funds (maximum 10% of remuneration)

    • health funds (maximum 2% of remuneration)

    are allowed provided that such contributions do not exceed one-fifth (20%) of the total taxable income.

  Employer’s contribution

€

 Employee contribution

€
Social Insurance 8.8% 8.8%
Self employed – 16.6%
Social Cohesion Fund 2% –
Redundancy Fund 1.2% –
Industrial Training Fund 0.5% –
Holiday Fund (if not exempt) 8% –

Maximum insurable  amount is EUR5.742 per month

National Health System Law

introduction of contribution effective from 1.3.2019

Contributions 2026
Employees/retirees/income earners 2.65%
Employers 2.90%
Self-employed 4.00%
The state 4.70%
Contributions are to be applied to a max level of taxable income (including dividends, interest & rental income) of €180,000 per annum.

Deductions 

  • Deduction from gross rental income before deducting wear and tear allowances and loan interest
 20% of income
  • Expenses incurred for repairing a building under preservation order as follows:
  
           Area up to 120 m2 €1.200 per m2
           Area up to 121 m2   – 1000 m2 €1.100 per m2
           Area up to 1000 m2    €700 per m2
  • Contributions to trade unions or professional bodies

 

Exemptions

  • Bank Interest
 100%
  • Interest from Government Bonds
 100%
  • Interest from the Housing Finance Corporation
 100%
  • Dividends
 100%
  • Any lump sum received by way of retiring gratuity, commutation of pension, death gratuity or lump sum compensation for death or bodily injury
  

 

100%
  • Lump sum repayment from life insurance schemes or approved provident funds
  

100%
  • Emoluments regarding services abroad to a non-resident employer or to a permanent establishment abroad of a resident employer for a total period of more than 90 days in the year of assessment.
  

 

100%
  • Remuneration from first employment exercised in Cyprus commencing after 26.7.2022 for individuals who immediately prior to the commencement of their employment in Cyprus were not residents of Cyprus for a period of 3 consecutive tax years and were employed by a non-tax resident employer. This is in force for 7 years.
 20% of the remuneration up to €8,550 annually
  • Remuneration from first employment exercised in Cyprus commencing as from 1.1.2022 with remuneration exceeding €55,000 by individuals who were not a resident of Cyprus for 15 consecutive tax years before their employment in Cyprus. The exemption in force for 17 years. Under some conditions individuals before 1.1.2022 are eligible.
 50% of the remuneration

Taxation overview

Resident companies
Resident Companies are the Companies whose management and control is exercised in Cyprus. The Corporation Tax for Resident Companies is 15%.

Non-resident companies
Non-Resident Companies are the Companies whose management and control is exercised outside Cyprus. The Corporation Tax for the Non-Resident Companies is Nil.

Meaning of Management and Control
In practice, following decided tax cases management and control is exercised where:-

  • The majority of the Directors reside.
  • The Board meetings are held.
  • The general policy of the Company is formulated.

CORPORATION TAX

Corporation Tax Rates   %
Resident Companies 15
Non-resident companies  Zero

 

Schedule showing how various types of Income are taxed for Resident and Non-resident Companies

TYPE OF INCOME TYPE OF TAX  TAX RATES
CHARGEABLE INCOME Corporation Tax 15%
CHARGEABLE INCOME
of a permanent establishment abroad		 Corporation Tax 0%
INCOME FROM SALE OF SHARES Corporation Tax 0%
CAPITAL GAINS TAX
There is Capital Gains Tax only if the property is sold in Cyprus		 Capital Gains Tax 20%
INTEREST INCOME 
BANK INTEREST / NON-TRADING INTEREST INCOME Corporate Tax 15%
Interest earned by an approved provident fund Defence Tax 3%
Interest earned by the Social Insurance Fund

An individual whose total annual income including interest does not exceed €12.000, has the right to a refund of the amount of SDC suffered on interest income in excess of 3%

 Defence Tax 3%
Interest earned by (i) Cyprus government bonds, (ii) Cyprus and foreign corporate bonds listed on a recognised stock exchange and (iii) bonds issued by Cyprus state organisations, or by Cyprus or foreign local authorities, listed on a recognised stock exchange Defence Tax 3%
TRADING INTEREST
Interest arising from the usual exercise of the ordinary activities i.e. interest on debit balance of clients		 Corporation Tax 15%
DIVIDENDS
Paid from one resident CyprusCompany to another resident Cyprus Company		 Defence Tax 0%
DIVIDENDS
Paid from a non-resident Company to a Cyprus resident Company		 Defence Tax 5%
DIVIDENDS
Paid from one resident Company to resident individuals
Paid from one resident Company to non- resident individuals		 Defence Tax
Defence Tax		 5%
0%
RENTAL INCOME Corporation tax 15% on profit
SHIP MANAGEMENT COMPANIES

SHIP OWNING COMPANIES

CHARTERS

 Corporation Tax Tonnage tax or 15% corporation tax
INTERNATIONAL TRUSTS Corporation Tax 0%
DOUBLE TAX TREATIES Apply
LOSSES Can be set off against future profits within 7 years from the year that losses incurred
TAX CREDIT According to double tax treaties or unilateral tax credit for non-tax treaty Countries