Tax benefits for foreign individuals
Tax benefits for foreign individuals
The case
Cyprus is famous for the sunny beaches and its hospitality. But it is considered an attractive destination for the tax benefits it offers as well.
Low Income Tax rates
The personal income tax rates applicable to an individual’s taxable income are as follows:
- Income up to EUR19,500 taxed at 0%
- Income from EUR19,501 to EUR28,000 taxed at 20%
- Income from EUR28,001 to EUR36,300 taxed at 25%
- Income from EUR36,301 to EUR60,000 taxed at 30%
- Income higher than EUR60,000 taxed at 35%
Amongst other items of expenditure, the following are deductible for Income Tax purposes:
- Contributions to approved provident funds.
- Subscriptions to trade unions or professional bodies.
- Donations to approved charitable organisations.
- Expenses for the renting of buildings up to the 20% of the rental income.
A foreign individual moving to Cyprus for work can claim one of the following exemptions on the taxation of its income:
- 20% exemption (read more)
- 50% exemption (read more)
Dividend tax
Dividends are taxed at 17% under the Special Defence Contribution (SDC) tax law. A foreign individual moving to Cyprus can claim an exemption from the taxation of dividends i.e. pay zero tax on dividends. Read more here.
Tax on interest income
‘Passive’ interest income is taxed at 30% under the SDC tax law. A foreign individual moving to Cyprus can claim an exemption from the taxation of dividends i.e. pay zero tax on dividends. Read more here.
‘Active’ interest income is taxed under the normal Income Tax rates mentioned above.
A foreign individual moving to Cyprus can claim an exemption from the SDC on rental income i.e. pay only the Income Tax. Read more here about the SDC exemption.
Rental income
Rental income is taxed under Income Tax and SDC as follows:
- Under Income Tax, rental income is taxed through the normal bands mentioned above following a 20% allowance.
- Under SDC, rental income is taxed at 3% following a 25% allowance i.e. an effective tax rate of 2.25%.
A foreign individual moving to Cyprus can claim an exemption from the SDC on rental income i.e. pay only the Income Tax. Read more here about the SDC exemption.
Profit from sale of shares and other qualifying titles
All gains arising from the disposal of securities, such as shares and bonds, are exempt from Cyprus taxation provided that the underlying assets do not include immovable property located in Cyprus. The term securities is defined in a circular issued by the Commissioner of taxation and it includes shares and bonds amongst other qualifying titles.
Salary received from a foreign employer
Remuneration from the rendering of salaried services to a non-resident employer based outside of Cyprus or to an overseas branch of a resident employer for an aggregate period in the year exceeding 90 days is exempt from Income Tax.
Incentive for the sale of Cyprus immovable property
In case of a Cyprus immovable property acquired up to 31st December 2016, any profit from the subsequent future disposal of such property will be exempted from the 20% Capital Gains Tax.
Other exemptions
More exemptions i.e. not subject to Income Tax:
- Any lump sum received as a retiring gratuity, commutation of pension, death gratuity or as consolidatmpensation for death or injury.
- Any lump sum repayment from life insurance schemes or from approved provident funds.
- Any income received due to inheritance or gift.
- No wealth tax.
The case
Cyprus is famous for the sunny beaches and its hospitality. But it is considered an attractive destination for the tax benefits it offers as well.
Low Income Tax rates
The personal income tax rates applicable to an individual’s taxable income are as follows:
- Income up to EUR19,500 taxed at 0%
- Income from EUR19,501 to EUR28,000 taxed at 20%
- Income from EUR28,001 to EUR36,300 taxed at 25%
- Income from EUR36,301 to EUR60,000 taxed at 30%
- Income higher than EUR60,000 taxed at 35%
Amongst other items of expenditure, the following are deductible for Income Tax purposes:
- Contributions to approved provident funds.
- Subscriptions to trade unions or professional bodies.
- Donations to approved charitable organisations.
- Expenses for the renting of buildings up to the 20% of the rental income.
A foreign individual moving to Cyprus for work can claim one of the following exemptions on the taxation of its income:
- 20% exemption (read more)
- 50% exemption (read more)
Dividend tax
Dividends are taxed at 17% under the Special Defence Contribution (SDC) tax law. A foreign individual moving to Cyprus can claim an exemption from the taxation of dividends i.e. pay zero tax on dividends. Read more here.
Tax on interest income
‘Passive’ interest income is taxed at 30% under the SDC tax law. A foreign individual moving to Cyprus can claim an exemption from the taxation of dividends i.e. pay zero tax on dividends. Read more here.
‘Active’ interest income is taxed under the normal Income Tax rates mentioned above.
A foreign individual moving to Cyprus can claim an exemption from the SDC on rental income i.e. pay only the Income Tax. Read more here about the SDC exemption.
Rental income
Rental income is taxed under Income Tax and SDC as follows:
- Under Income Tax, rental income is taxed through the normal bands mentioned above following a 20% allowance.
- Under SDC, rental income is taxed at 3% following a 25% allowance i.e. an effective tax rate of 2.25%.
A foreign individual moving to Cyprus can claim an exemption from the SDC on rental income i.e. pay only the Income Tax. Read more here about the SDC exemption.
Profit from sale of shares and other qualifying titles
All gains arising from the disposal of securities, such as shares and bonds, are exempt from Cyprus taxation provided that the underlying assets do not include immovable property located in Cyprus. The term securities is defined in a circular issued by the Commissioner of taxation and it includes shares and bonds amongst other qualifying titles.
Salary received from a foreign employer
Remuneration from the rendering of salaried services to a non-resident employer based outside of Cyprus or to an overseas branch of a resident employer for an aggregate period in the year exceeding 90 days is exempt from Income Tax.
Incentive for the sale of Cyprus immovable property
In case of a Cyprus immovable property acquired up to 31st December 2016, any profit from the subsequent future disposal of such property will be exempted from the 20% Capital Gains Tax.
Other exemptions
More exemptions i.e. not subject to Income Tax:
- Any lump sum received as a retiring gratuity, commutation of pension, death gratuity or as consolidatmpensation for death or injury.
- Any lump sum repayment from life insurance schemes or from approved provident funds.
- Any income received due to inheritance or gift.
- No wealth tax.