Cyprus Income Tax Calculator (CY) 2024

Cyprus Income Tax Rules

Confused about Cyprus Income Tax Rules? Want to pay minimum taxes and enjoy a higher income? Read here what rules apply and how you can benefit.

This beautiful country in the Eastern Mediterranean is well known for one of the most favorable tax systems in the entire EU.

If you’re considering moving to Cyprus or starting a business there, you must understand the income tax rules (and what that means to you).

Who Pays Taxes?

Firstly, let’s talk about who must pay Cyprus’s income tax.

If you live in Cyprus for more than 183 days in a year, you are a tax resident.

This means you need to pay tax on your worldwide income.

If you live in Cyprus for less than 183 days, you are a non-tax resident and only pay tax on income earned in Cyprus.

Income Tax Rates

Now, let’s dive into the tax rates.

Cyprus uses a progressive tax system, which means the more you earn, the higher your tax rate.

Here are the tax brackets.

1. If you earn up to €19,500, you don’t pay any income tax. Yes, you read that right! This tax-free threshold is one of the highest in Europe.
2. For income between €19,501 and €28,000, the tax rate is 20%.
3. If you earn between €28,001 and €36,300, the tax rate increases to 25%.
4. For income between €36,301 and €60,000, you’ll pay a 30% tax rate.
5. If you earn over €60,001, the tax rate is 35%.

It’s also important to note that Cyprus does not impose any inheritance tax or wealth tax.

Tax Deductions

There are also some tax deductions available.

For example, you can deduct social insurance contributions, pension contributions, and donations to approved charities from your taxable income.

Tax Rules For Private Limited Companies

Many people open 1-person limited companies in Cyprus because of very low taxes.

Here are some basic rules if you are interested in doing the same.

TAXES

• Corporate tax on profit is 12.5%;
• The fee on paying dividends is another 2.5%, but for amounts above 180k (in paid dividends), one doesn’t pay this 2.5%;
• No income tax is paid on the paid-out dividends (from the company to yourself);
• No capital-gain taxes as well (because of a program called non-domical program where you can be tax exempt on all capital gains — both interest and dividends — and this can last up to 17 years);
• This gives 15% of taxes in total;
• For software companies, you can also apply for an intellectual property ruling that allows a decrease of the tax rate from 12.5% to 2.5% (this requires a lawyer and tax consultant as well as the government fee, and this can go from EUR 2k to 8k per intellectual right you want to protect);

COSTS

Opening a company costs around 1.5k, and one has to submit a yellow slip application (permanent residency) and a non-domical application before opening a company (perhaps you can apply for that myself since it is not that complicated, and it costs around 500 euros if lawyers apply for me).

The administration costs are EUR 3-4k on EUR 300k of total revenue per year.

RULES

At least 60 days a year in Cyprus, and one must have a permanent address for yourself as a director of the company.

The apartment is, therefore, an extra cost.

You cannot be in any other country for more than six months a year (in a row).

Final Thoughts

Cyprus offers a favorable tax environment with its high tax-free threshold and progressive tax rates.

It’s even more favorable to open a private limited company if low taxes are your goal.

Another country with low-income taxes is Croatia — check out the rules here.