With a broad and expanding double tax treaty network and one of the lowest corporate tax rates in the E.U (12, 5%) as well as a top tier location of corporate and advisory/legal services, it is justifiable that an entity or individual would seek to relocate and acquire the Cypriot Tax residency in order to profit from the benefits this entails.
Which income will be taxed in Cyprus?
- Residency for income tax purposes, is determined whether an individual has lived in Cyprus for minimum 6 months in the tax year. An individual who is a tax resident in Cyprus is taxed on his/her worldwide income.
- If one has lived for less than 6 months in the tax year he/she is not considered tax resident in Cyprus and shall only pay tax on income earned in Cyprus If income flows from other EU countries there is no need to pay twice the tax on the same income.
A company’s tax residency will be determined on whether the control and management of such a company is exercised within the Republic of Cyprus
Types of Income of a tax resident
- Business Income from services provided or otherwise earned by the person, Income from salaried services or holding an office, Dividends, Interest, Rent, Royalties, Trading goodwill, Pensions and annuities, Profit from sale of shares and other company titles 3. Benefits of Cyprus Tax Residency
- Property acquired between 16 July 2015 and 31 December 2016 will be exempt from capital gains tax upon a subsequent disposal
- One of the lowest corporate income tax rates in the E.U (12,5%)
- No Capital duty.
- No inheritance/estate tax
- Dividends received by a Cyprus resident company are generally exempt from Special Defence Contribution Tax (SDC) tax, whether received from a company located in Cyprus or abroad.
- Gains derived from the sale of shares are tax exempt.
- Two new double tax treaties effective as of 1 January 2016 with Guernsey and Switzerland and from 1 January 2017 with Bahrain adding to the already flourished network of double tax treaties.
- Special Defence Contribution is imposed only on dividends
- With effect from 1 January 2015, forex differences are tax neutral for CIT purposes (i.e. all forex gains are not taxable and all forex losses are not deductible
- Application of all E.U directives and their flexible measures. Incentives for acquiring Cyprus Tax Residency
- Special Incentives apply for persons who were not tax resident in Cyprus previously and their earnings exceed €100,000 per year. 50% of their income will be exempt from tax for the next 10 years.
- 20% or €8,550 (whichever is smaller) exemption, for 3 years, of the income of a person that was not tax resident of Cyprus before and starts employment in Cyprus.
- Pensions received from overseas by a tax resident individual that exceed the amount of €3,420 euro are taxed at 5%.