Tax Benefits For Expatriates and High Net Worth Individuals Relocating to Cyprus

The Cyprus Investment Programme and the Benefits

Why Move to Cyprus?

Cyprus is an appealing European jurisdiction, located in the eastern Mediterranean Sea and offering a warm climate and attractive beaches. Situated off the southern coast of Turkey, Cyprus is accessible from Europe, Asia, and Africa. Nicosia is the centrally located capital of the Republic of Cyprus. The official language is Greek, with English also being widely spoken.

Cyprus offers a palette of personal tax incentives for expatriates and high net worth individuals relocating to Cyprus.

Personal Taxation

  • Tax Residence in 183 days

If an individual becomes tax resident in Cyprus by spending more than 183 days in Cyprus in any one calendar year, they will be taxed on income arising in Cyprus and also on foreign source income. Any foreign taxes paid can be credited against the personal income tax liability in Cyprus.

  • Tax Residence under the 60 Day Tax Rule

An additional scheme has been implemented whereby individuals can become tax resident in Cyprus by spending a minimum of 60 days in Cyprus, provided that certain criteria are met.

  • Non-Domicile Tax Regime

Individuals who were not previously tax resident can also apply for non-domicile status. Individuals who qualify under the Non-Domicile Regime are exempt from tax on; interest*, dividends*, capital gains* (apart from capital gains derived from the sale of immovable property in Cyprus), and capital sums received from pension, provident and insurance funds. In addition, there is no wealth and no inheritance tax in Cyprus.

*subject to contributions to the national health system at the rate of 2.65%

Income Tax Exemption: Moving to Cyprus to Take up Employment

On the 26th of July 2022 the long-anticipated tax incentives for individuals have been implemented. As per the new provisions of the income tax legislation, a 50% exemption for income in relation to first employment in Cyprus is now available for individuals with annual remuneration in excess of EUR 55.000 (previous threshold EUR 100.000). This exemption will be available for a period of 17 years.

Nil/Reduced Withholding Tax on Income Received from Abroad

Cyprus has more than 65 tax treaties that provide for nil or reduced withholding tax rates on; dividends, interest, royalties, and pensions received from abroad.

Lump sums received as a retirement gratuity are exempt from tax.

In addition, a Cypriot tax resident, receiving pension income from abroad may choose to be taxed at a flat rate of 5%, on amounts exceeding €3,420 per year.

Additional Information

For additional information about the attractive tax regime for individuals in Cyprus, please contact Robert Homem or Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

What Are The Main Benefits Offered By The Cyprus Non-Dom Regime?

New “60 Day” Tax Residency Rule for Individuals in Cyprus

Cyprus offers; a warm climate, good infrastructure, convenient geographic location, membership of the EU, tax advantages for companies and incentives for individuals through the Cyprus non-dom regime.

Background

A tax law, approved by the Cyprus House of Representatives in 2015, provides significant benefits to individuals and to companies, relocating to Cyprus.

The Main Benefits

The main benefits of the legislation, in relation to individuals, include:

  • Special Defence Tax exemption for Cypriot non-domiciled tax residents;
  • Extension of the personal income tax reduction relating to the salaries of new residents.

Tax Exemptions Enjoyed by Tax Residents of Cyprus Who Qualify under the Non- domicile Tax Regime in Cyprus

As a result of previous tax legislation and the exemption from the Cyprus Special Contribution for Defence Tax (“SDC”) introduced in July 2015, non-domiciliaries are exempt from taxation in Cyprus on the following sources of income:

  • Interest;
  • Dividends;
  • Capital gains (other than on the sale of immoveable property in Cyprus);
  • Capital sums received from pensions, provident and insurance funds.

Capital Sums Remitted to Cyprus are Not Subject to Taxation

The tax benefits detailed above, are enjoyed even if the income has a Cyprus source or if it is remitted to Cyprus.

In addition there are NO wealth and NO inheritance taxes in Cyprus.

Other Beneficial Features of the Cyprus Tax System for Individuals

Income Tax Reduction for New Residents in Cyprus

On the 26th of July 2022 the long-anticipated tax incentives for individuals have been implemented. As per the new provisions of the income tax legislation, a 50% exemption for income in relation to first employment in Cyprus is now available for individuals with annual remuneration in excess of EUR 55.000 (previous threshold EUR 100.000). This exemption will be available for a period of 17 years.

Low Tax Rate: Foreign Pensions

The first €3,420 of a pension from employment outside Cyprus is tax free, and individuals can elect to pay only 5% income tax on pension income in excess of this amount.

Cyprus’ Standard Income Tax Rates are:

  • €0 to €19,500: 0%;
  • €19,501to €28,000: 20%;
  • €28,001to €36,300: 25%;
  • €36,301to €60,000: 30%;
  • Greater than €60,000: 35%;

The Definition of Residence and Non-Domicile in Cyprus for “SDC” Purposes

An individual is considered as tax resident in Cyprus if they spend more than 183 days in any one calendar year there. Prior to the introduction of the Non-domicile tax regime, income received by Cyprus tax residents from dividends, rent and interest, was subject to the Special Contribution for Defence Tax (SDC).

This is why the introduction of the “non-domicile” tax status was so important. The law of July 2015 specifies that tax resident individuals, who are non-Cyprus domiciled, are completely exempt from SDC irrespective of where their income is generated or remitted from.

  • The Cyprus non-domicile tax regime is therefore particularly interesting for individuals whose main source of income is either dividend or interest income. In addition, individuals can take advantage of the exemption from taxation on capital gains.

The Definition of Domiciled in Cyprus

 The term “domiciled in Cyprus” is defined by law as an individual who has a Cypriot domicile of origin, in accordance with the Wills and Succession Law, which is the domicile of his/her father at the time of his/her birth. Or alternatively, an individual who is considered a Cyprus tax resident, as per the Income Tax Law, for a period of at least 17 years out of the last 20 years before the relevant tax year, irrespective of his/her domicile of origin.

Summary

Non-domicile status in Cyprus offers a number of tax related benefits.

The regime, introduced in July 2015, offers additional financial incentives for individuals to consider Cyprus as an attractive destination for tax residence, and these incentives continue to be in place.

Additional Information

For further information about the attractive tax regime for individuals in Cyprus, please contact Robert Homem or Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.