Income tax in Cyprus
Taxation Researcher | September 20, 2021
INDIVIDUAL TAXATION
Residents in Cyprus are taxed on their worldwide income. Married couples are assessed and taxed separately.
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
Income is classified in different categories: (1) business profits (including income from a profession or a vocation and from farming and animal husbandry), (2) income from employment, (3) discounts (dividends and interest are listed but exempt), (4) pensions, charges, and annuities, (5) rents, royalties, remuneration, or other profits from property, and (6) net consideration in respect of trade goodwill.
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 |
|
| TAXABLE INCOME, (€) | TAX RATE |
| Up to 19,500 | 0% |
| 19,500 - 28,000 | 20% on band over €19,500 |
| 28,000 - 36,300 | 25% on band over €28,000 |
| 36,300 - 60,000 | 30% on all income over €36,300 |
| Over 60,000 | 35% on all income over €60,000 |
| Source: Global Property Guide | |
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 contributions 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 subject to income tax in Cyprus and a standard deduction of 20% of gross rental income is allowed to account for income-generating expenses. Taxable rental income is computed as gross rental income less 20% of gross rental income.
CAPITAL GAINS TAX
Capital gains from the sale of immovable property acquired after 1 January 1980 are subject to 20% tax. Taxable capital gain is computed as gross selling price less acquisition costs and improvement costs.
However, individuals can deduct lifetime exemptions from the capital gains, which is given only once per taxpayer during his lifetime. The deductible amount varies depending on the property seller and the property.
- An individual selling his private residence may deduct a lifetime exemption of €85,430, provided that the owner occupied it for at least 5 years.
- A farmer disposing or selling agricultural land may deduct a lifetime exemption of €25,629.
- Any other property disposal may deduct a lifetime exemption of €17,086.
The following disposals of immovable property are not subject to capital gains tax:
- Transfers of property arising on death
- Gifts made from parent to child or between husband and wife or between up to third degree relatives
PROPERTY TAXATION
Immovable Property Tax
Immovable property tax has been abolished as from 1 January 2017.
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 (€) | TAX RATE |
| Up to €12,500 | 0% |
| €12,500 to €40,000 | 0.60% on band over €12,500 |
| €40,000 - €120,000 | 0.80% on band over €40,000 |
| €120,000 - €170,000 | 0.90% on band over €120,000 |
| €170,000 - €300,000 | 1.10% on band over €170,000 |
| €300,000 - €500,000 | 1.30% on band over €300,000 |
| €500,000 - €800,000 | 1.50% on band over €500,000 |
| €800,000 - €3,000,000 | 1.70% on band over €800,000 |
| Over €3,000,000 | 1.90% on value over €3,000,000 |
Real estate tax is payable by the end of September each year and it is not deductible for income tax purposes.
CORPORATE TAXATION
INCOME TAX
Corporate income in Cyprus is taxed at 12.5%. Expenses incurred in the production of income are deductible from gross corporate income.
CAPITAL GAINS TAX
The capital gains of a company are subject to 20% tax. Taxable gain is computed as gross selling price less acquisition costs and improvement costs. If the capital gains resulted from the disposal of property due to reorganization, the gains are not taxable.