Tax Benefits and Cyprus Double Tax Treaties for Foreign Buyers

Learn how Cyprus’s double tax treaties and property tax benefits help foreign buyers. Avoid double taxation on income and capital gains with DTT agreements. Cyprus has built a reputation as a tax-efficient jurisdiction for property investors. Foreign buyers enjoy numerous benefits, including an extensive network of double taxation treaties (DTTs), no inheritance tax, and favourable treatment for capital gains.

Overview of Double Tax Treaties

• Cyprus has signed over 60 double taxation treaties worldwide.
• DTTs prevent the same income from being taxed in both Cyprus and the investor’s home country.
• Treaties cover rental income, capital gains, and dividends.
• Major treaty partners include the UK, Russia, the USA, China, India, and most EU countries.

Key Tax Benefits for Foreign Buyers

• No inheritance tax in Cyprus, allowing seamless transfer of property to heirs.
• Reduced VAT rate of 5% on first homes (primary residence up to 200 sqm).
• Exemptions on capital gains for certain transactions, such as property acquired before 1980.
• Low corporate tax (12.5%) for investors using holding structures.

How DTTs Protect Investors

• Rental income taxed only once, either in Cyprus or home country, depending on treaty.
• Capital gains on Cyprus property usually taxed in Cyprus, but often exempt in home country.
• Dividends and interest income subject to reduced withholding tax rates.
• Provides legal certainty and protection against double taxation disputes.

Case Study: British Investor Using DTT

A UK citizen earns €15,000 annually from renting a villa in Paphos. Under the UK–Cyprus treaty, tax is payable only in Cyprus, avoiding double taxation. They benefit from lower effective tax rates compared to the UK system.

Case Study: Russian Buyer Leveraging DTT

A Russian buyer sells a Limassol apartment for profit. Under the Russia–Cyprus DTT, capital gains are taxed in Cyprus only, preventing additional Russian tax liability.

Checklist for Leveraging Tax Benefits

1. Verify if your home country has a DTT with Cyprus.
2. Confirm treatment of rental income and capital gains under the treaty.
3. Apply for a reduced VAT rate if eligible for primary residence.
4. Keep tax residency certificates for compliance.
5. Consult tax advisors to optimise treaty benefits.

FAQs on Tax Benefits and DTTs

Q: Does Cyprus have a DTT with my country?
A: Likely, as Cyprus maintains treaties with 60+ countries.

Q: Do I pay inheritance tax on Cyprus property?
A: No, inheritance tax was abolished.

Q: How is rental income taxed?
A: Typically taxed in Cyprus, often exempt in the home country under DTT.

Q: Do I still need to file taxes in my home country?
A: Yes, but treaty credits usually prevent double taxation.

Q: Are all foreign buyers eligible for reduced VAT?
A: Yes, if the property is their first and primary residence.

Final Recommendations

Cyprus’s extensive DTT network and favourable property tax regime make it one of Europe’s most attractive real estate destinations for foreign buyers. Investors should review applicable treaties, consult tax professionals, and structure purchases strategically to maximise benefits.