Cyprus: The In-House Lawyer Private Client Guide

Last Updated: 2 May 2019
Article by Elias Neocleous and Elina Kollatou
Most Read Contributor in Cyprus, July 2019

1. Which factors bring an individual within the scope of tax on income and capital gains?

Taxes on income

An individual who is resident in Cyprus for a particular tax year is liable to income tax on worldwide income, whether that income is remitted to Cyprus or not. Non-residents are subject to income tax on income accruing or arising from sources in Cyprus. However, there is no income tax on dividend and interest income, so if the individual is not domiciled in Cyprus and liable to SDC tax (see below), these categories of income are entirely free of Cyprus taxation.

Special Defence Contribution, commonly known as SDC tax, is payable on dividends, interest (other than interest received as a business activity) and rents receivable. In order to be liable for SDC tax an individual must be both resident and domiciled in Cyprus for the tax year concerned. Individuals who are resident but not domiciled in Cyprus are exempt from SDC tax.

Capital gains tax

An individual who is resident in Cyprus for a particular tax year is liable to capital gains tax. However, capital gains tax is levied only on a very limited category of gains, namely gains on disposal of immovable property in Cyprus and on disposal of shares in non-listed companies directly or indirectly holding immovable property in Cyprus, to the extent that the gain on disposal of the shares derives from the immovable property.

Residence

The traditional determinant of residence for individuals is physical presence, with individuals being considered to be resident if they are present in Cyprus for more than 183 days in the relevant year. Days of departure and arrival are treated as follows:

  • The day of departure from Cyprus counts as a day of residence outside Cyprus.
  • The day of arrival in Cyprus counts as a day of residence in Cyprus.
  • Arrival in and departure from Cyprus on the same day counts as one day of residence in Cyprus.
  • Departure from and return to Cyprus on the same day counts as one day of residence outside Cyprus.

Law 119(I) of 2017 introduced an alternative residence qualification for 2017 and later tax years. An individual will be deemed to be resident in Cyprus if during the tax year concerned he or she maintained a permanent residence in Cyprus, undertook any business or employment in Cyprus which continued to exist at the end of the tax year) and was present in Cyprus for at least 60 days. All three conditions must be satisfied and the individual concerned must not be a tax resident of any other country (for example by reason of a physical presence there for 183 days) for the tax year in question.

Domicile

Domicile is a general legal concept and is distinct from nationality or residence. Generally, a person's domicile is the place that person considers their permanent home. As in many areas, Cyprus follows English common law in determining domicile. For the purpose of determining liability to SDC tax, an individual will be deemed to be domiciled in Cyprus if he or she has been a tax resident for 17 or more of the 20 tax years immediately preceding the year of assessment.

2. What are the taxes and rates of tax to which an individual is subject in respect of income and capital gains and, in relation to those taxes, when does the tax year start and end, and when must tax returns be submitted and tax paid?

For all taxes, the tax year is the calendar year. Spouses are taxed separately.

Income tax

Income tax is payable on taxable income for the year at the following rates:

Income band Rate
From To
0 €19,500 0
€19,500 €28,000 20%
€28,000 €36,300 25%
€36,300 and above 30%

Relief is given for donations to approved charities, professional and trade union subscriptions, life insurance premiums and contributions to pension, social insurance and welfare funds.

Several categories of income are exempt from income tax, including:

  • interest and dividends receivable.
  • lump sums received on retirement.
  • capital sums from approved life assurance policies and provident or pension funds.
  • income from employment services provided abroad to a non-resident employer or an overseas permanent establishment of a resident employer for a period exceeding 90 days in the tax year.
  • profit from the sale of shares.
  • certain pensions such as widow's pension).
  • salaries of officers and crew of ships owned by a Cyprus shipping company that sail under the Cyprus flag and operate in international waters.
  • income from a qualifying scholarship, exhibition, bursary or similar educational endowment.

For income tax purposes a 20% deduction is allowed from rental income received.

The taxpayer may opt from year to year for any foreign pension either to be taxed on the standard basis or on an alternative basis in which the first €3,420 per annum is free of tax and the excess over that amount is taxed at 5%.

There is a separate system of taxation for companies or individuals engaged in operation or management of ships engaged in international trade, based on the tonnage of the vessels concerned.

There is a self-assessment system for income tax, under which taxpayers must submit an estimated tax return part-way through the tax year accompanied by payment of half the estimated liability, and the balance of the estimated liability at by the end of the tax year. The final tax return is submitted after the end of the tax year, together with payment of any final balance. The tax return must be based on audited financial statements if the taxpayer has an income of more than €70,000 from trading or professional activities. Individuals must submit a provisional estimate of profits and tax payable for the year by 31 July of the tax year, together with a remittance of half the estimated tax payable. The estimates may be revised at any time before 31 December of the tax year, and the balance of the estimated tax payable must be paid by then. A penalty may be imposed in the event of an excessive difference between the first and the final estimate.

Individuals who are exempt from the requirement to provide audited financial statements are required to submit their final tax return for the year, with a remittance for any tax payable, by 30 September following the end of the tax year. Tax returns must be submitted electronically via the official TAXISNET system.

Special contribution for defence ("SDC tax")

Investment income (passive interest, dividends and rents) received by individuals who are both resident and domiciled in Cyprus for the tax year concerned is subject to SDC tax at 30 percent on interest, 17 percent on dividends and 2.25 percent on rents. If the individual is resident but not domiciled in Cyprus there is no liability to SCD. Given that interest and dividends are exempt from income tax, this means that interest and dividend income of resident non-domiciled individuals is exempt from all forms of Cyprus taxation, and in many cases exempt from overseas tax.

Taxpayers receiving rents, interest or dividends from which SDC tax has not been deducted must submit semi-annual returns together with payment of the amount due.

Capital gains tax

The only gains subject to capital gains tax, which is charged at 20 percent, are gains from the disposal of immovable property in Cyprus and shares in companies (but not companies listed on a recognised stock exchange) directly or indirectly owning immovable property in Cyprus, to the extent that the gain is derived from an appreciation in value of the immovable property.

Gains on disposal of any other kind of asset are entirely free of capital gains tax.

Taxpayers must report any capital gains as they arise and pay the tax. However, as capital gains tax only applies to a very limited range of assets this is not an issue that affects most taxpayers.

3. Are withholding taxes relevant to individuals and, if so, how, in what circumstances and at what rates do they apply?

There is a PAYE system for salaries. Subject to certain exemptions, SDC tax must be deducted at source from dividend and interest payments and certain rents and accounted for to the Tax Department.

Cyprus does not impose withholding taxes on interest, dividends or most royalties paid to non-residents.

Royalties paid to non-residents are subject to withholding tax at 10 per cent (or 5 percent in the case of cinema films), but only if they relate to the use of the intellectual property asset within Cyprus.

4. Is there a wealth tax and, if so, which factors bring an individual within the scope of that tax, at what rate or rates is it charged, and when must tax returns be submitted and tax paid?

There are no wealth taxes in Cyprus.

5. Is tax charged on death or on gifts by individuals and, if so, which factors cause the tax to apply, when must a tax return be submitted, and at what rate, by whom and when must the tax be paid?

There are no succession taxes in Cyprus, and no taxes on lifetime transfers.

6. Are tax reliefs available on gifts (either during the donor's lifetime or on death) to a spouse, civil partner, or to any other relation, or of particular kinds of assets (e.g. business or agricultural assets), and how do any such reliefs apply?

Not applicable - there are no succession taxes, and no taxes on lifetime transfers.

7. Do the tax laws encourage gifts (either during the donor's lifetime or on death) to a charity, public foundation or similar entity, and how do the relevant tax rules apply?

Not applicable - there are no succession taxes, and no taxes on lifetime transfers.

8. How is real property situated in the jurisdiction taxed, in particular where it is owned by an individual who has no connection with the jurisdiction other than ownership of property there?

There is no immovable property tax in Cyprus, and no special taxation of property owned by an individual who has no connection with the jurisdiction other than ownership of property there.

9. Are taxes other than those described above imposed on individuals and, if so, how do they apply?

Stamp duty

The following rules apply to stamp duty:

  • No stamp duty is payable in respect of transactions with a consideration of €5,000 or less.
  • For transactions with a consideration in excess of €5,000 but not exceeding €170,000, the rate of stamp duty is €1.50 for every €1,000 or part thereof.
  • For transactions with a consideration in excess of €170,000, the rate of stamp duty is €2 for every €1,000 or part thereof.
  • The maximum stamp duty payable on a contract is €20,000.
  • Where no amount of consideration is specified in the contract, the stamp duty is €35.
  • For a transaction which is evidenced by several documents, stamp duty is payable on the main contract and ancillary documents are charged at a flat rate of €2.
  • Stamp duty of €430 is payable on the creation of a trust under the International Trusts Law.

Stamp duty must be paid within 30 days from the date of execution of the relevant documents or, if they are executed abroad, within 30 days after they are received in Cyprus. If stamp duty is paid late, a surcharge of approximately 10 percent of the unpaid amount is payable if payment is made within six months after the due date. Otherwise the surcharge is twice the unpaid amount.

Transfer fees

Land transfer fees are payable when title deeds are issued by the Department of Land and Surveys. If VAT is payable on the property no transfer fee is payable; otherwise the transfer fee is charged at progressive rates on successive tranches of the acquisition price (or market value of gifts) as follows:

  • Up to €85,000: 1.5 percent.
  • €85,000 to €170,000: 2.5 percent.
  • Above €170,000: 4 percent.

10. Is there an advantageous tax regime for individuals who have recently arrived in or are only partially connected with the jurisdiction?

With effect from the 2008 tax year, under article 8(21) of the Income Tax Law of 2002, individuals becoming tax-resident and taking up employment in Cyprus became entitled to an exemption of 20% of their annual income from employment in Cyprus for the first three years of employment. The exemption was limited to €8,550 per annum. In 2012 an alternative exemption was introduced in the form of article 8(23), exempting 50% of the first five years' income from employment in Cyprus of a person who was not previously resident in Cyprus, provided the income from employment in Cyprus exceeds €100,000 per annum.

In 2015, as part of a package of measures aimed at stimulating the economy, both these exemptions were modified with effect from the beginning of the 2015 tax year. In respect of employments which began after 1 January 2012 the article 8(21) exemption was extended to cover the first five years following the year in which the employment began, but ceases to be available after the 2020 tax year. The article 8(23) exemption for earnings of more than €100,000 was extended from five years to 10. In respect of employments that began on or after January 1, 2015, the article 8(23) exemption is not available to anyone who was resident in Cyprus in any three of the five tax years preceding the year in which the employment in Cyprus began, or to anyone who was resident in Cyprus in the year preceding the year in which the employment began.

Only one of the exemptions can be claimed in any tax year, but the taxpayer may elect from year to year which of the exemptions to claim, as long as the relevant conditions are satisfied, principally that the individual is resident and employed in Cyprus.

To view this article in full, please click here.

Originally published by The In-House Lawyer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
AGP Law Firm | A.G. Paphitis & Co. LLC
C.Savva & Associates Ltd
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
AGP Law Firm | A.G. Paphitis & Co. LLC
C.Savva & Associates Ltd
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions