Cyprus: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Residents in Cyprus are taxed on their worldwide income. Foreign individuals become residents in Cyprus if they stay in the country for a period or periods exceeding a total of 183 days in a tax year.
INCOME TAX
Residents are taxed on almost all kinds of income, and taxable income is generally an aggregate of all income, less deductions and exemptions.
INCOME TAX RATES 2008 |
|
| TAXABLE INCOME, CYP (€) | RATE |
| Up to 10,750 (€18,368) | nil |
| 10,750 – 15,750 (€26,911) | 20% on band over €18,368 |
| 15,750 – 20,600 (€35,197) | 25% on band over €26,911 |
| Over 20,600 (€35,197) | 30% on all income over €35,197 |
| Source: Global Property Guide | |
Deductions
Taxpayers are entitled to the following general deductions:
- Donations made to approved charities
- Social Insurance Fund contributions and similar contributions paid abroad
- Life insurance premiums and pension plans and medical funds contributions
A specific limit for life insurance of 7% of the insured capital sum and an overall limit of one-sixth of taxable income is set for the general deductions.
RENTAL INCOME
Rental income is taxed in Cyprus at the normal rate, with specific deductions. Taxable rental income is computed as gross rental income less related expenses and a 20% exemption.
Special Contribution for Defence
The rate for the Special Contribution for the Defence depends on which type of income it is being imposed on. For rental income, 25% of the gross rental income is deducted first before the 3% rate is applied.
CAPITAL GAINS TAX
Capital gains from the sale of immovable property acquired after January 1, 1980 are subject to 20% tax. Taxable capital gain is computed as gross selling price less acquisition costs and improvement costs. However, there is a cumulative life-time exemption of CYP50,000 (€85,430) for the sale of a private residence, provided that the owner occupied it for at least 5 years.
VALUE ADDED TAX
Individuals buying property for the first time will be charged a reduced rate of 5% value added tax. For subsequent purchases, the standard 15% rate will be charged. VAT is imposed on the gross selling price of the property.
PROPERTY TAXATION
Real Estate Tax
Real estate tax is levied on the value of properties located in Cyprus. The base of the tax is the estimated market value of the property on January 1, 1980.
TAX ON IMMOVABLE PROPERTY |
|
| TAXABLE VALUE CYP (€) | TAX RATE |
| Up to 100,000 (€170,860) | nil |
| 100,001 – 250,000 (€427,150) | 2.5% on band over €170,860 |
| 250,001 – 500,000 (€854,301) | 3.5% on band over €427,150 |
| Over 500,000 (€854,301) | 4% on value over €854,301 |
Cyprus - more data and information
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