Tax Incentives for Foreign Investors in Cyprus
Comprehensive guide to Cyprus tax incentives for foreign investors. Covers VAT reductions, exemptions, double taxation treaties, and residency benefits. Cyprus has established itself as an attractive destination for foreign investors due to its favourable tax regime. Property buyers benefit from reduced VAT, exemptions, and international tax treaties.
Reduced VAT on Property
• Standard VAT: 19% on new properties.
• Reduced VAT: 5% for primary residences up to 200 sqm, available to both locals and foreigners.
• Requirement: Property must be used as the buyer’s first and permanent residence in Cyprus.
Exemptions and Allowances
• Transfer Fee Exemption: No transfer fees if VAT was applied on the purchase.
• CGT Exemptions: Available for primary residences and family transfers.
• Tax-Free Rental Income Thresholds: Certain rental income may benefit from deductions.
Double Taxation Treaties
• Cyprus has treaties with more than 65 countries.
• Prevents double taxation of property income or capital gains.
• Particularly beneficial for investors from the UK, Russia, and EU states.
Residency and Citizenship Incentives
• Permanent Residency: Granted with property investment of €300,000 or more.
• Fast-Track Residency: Enables investors to reside in Cyprus with family.
• Although the Citizenship-by-Investment program was suspended, residency schemes remain attractive.
Case Study: Foreign Rental Property Investor
A German investor buys a €250,000 apartment in Nicosia for rental:
• VAT: 19% applied (no exemption as not a permanent residence).
• Transfer Fees: Exempt (VAT paid).
• Rental income is taxed at standard rates but protected from double taxation under the Germany-Cyprus treaty.
Case Study: Luxury Villa Buyer
An investor from the Middle East purchases a €1.2 million villa in Limassol:
• Reduced VAT: 5% on first 200 sqm, 19% on remaining sqm.
• CGT exemption if later transferred to children.
• Eligible for permanent residency through investment.
Checklist for Maximising Tax Benefits
1. Verify eligibility for reduced VAT.
2. Confirm double taxation treaty benefits with your country of residence.
3. Use professional tax advisors to structure ownership.
4. Plan for CGT exemptions on primary residences.
5. Register for residency programs where applicable.
FAQs on Foreign Investor Incentives
Q: Do foreigners pay more tax than Cypriots?
A: No, tax incentives apply equally.
Q: Can I apply for residency through property investment?
A: Yes, with a minimum investment of €300,000.
Q: Is reduced VAT automatic?
A: No, you must apply and meet conditions.
Q: Do double taxation treaties cover rental income?
A: Yes, most treaties include rental income and CGT.
Q: Are there special benefits for eco-friendly properties?
A: Yes, reduced VAT and grants may apply.
Final Recommendations
Foreign investors in Cyprus enjoy one of the most favourable tax environments in Europe. Combining reduced VAT, double taxation treaties, and residency incentives makes Cyprus a strategic location for property investment.