Cyprus Tax Incentives for Foreign Investors in Cyprus
Learn about Cyprus tax incentives for foreign investors. Covers Cyprus double tax treaties, exemptions, corporate tax, and residency benefits. Cyprus offers numerous tax incentives to attract foreign investors. These measures have positioned the island as a leading European destination for property and business investment.
Corporate and Personal Tax Benefits
• Corporate tax rate: 12.5%, one of the lowest in the EU.
• No inheritance tax in Cyprus.
• Low dividend withholding tax, often exempt under treaties.
• Rental income is taxable, but deductible expenses reduce liability.
Capital Gains Tax Incentives
• Standard CGT is 20%, but exemptions apply:
– No CGT on property purchased between 2015–2016 (special exemption period).
– Lifetime exemption up to €85,430 for primary residence sales.
– CGT exemptions for inherited properties.
Double Tax Treaties
• Cyprus has over 65 double tax treaties.
• Prevents double taxation for investors with global income.
• Treaties cover the UK, Russia, India, China, the Middle East and EU states.
• Investors often pay tax only in Cyprus for Cyprus-sourced income.
Residency and Citizenship Incentives
• Residency by Investment: Property purchases above €300,000 qualify for fast-track permanent residency.
• Citizenship by Naturalisation: Previously linked to property investment (program suspended but under review).
• Residency allows visa-free travel across the EU for non-EU nationals.
Worked Example: UK Investor
A UK investor earns €50,000 rental income in Cyprus. Under the UK-Cyprus tax treaty, rental income is taxed in Cyprus only. After deductible expenses of €10,000, tax applies on €40,000, reducing liability significantly.
Worked Example: Middle Eastern Buyer
An investor from Dubai buys a €400,000 villa in Limassol. They qualify for permanent residency. No inheritance tax ensures the property can pass to heirs tax-free.
Case Study: EU Retiree
A German retiree relocates to Paphos, purchasing a €250,000 property. They benefit from Cyprus’s double tax treaty with Germany, avoiding double taxation on pension income.
Checklist for Foreign Investors
1. Confirm eligibility for residency by investment.
2. Review double tax treaties with your home country.
3. Budget for capital gains tax, but check available exemptions.
4. Factor in corporate tax if investing through a company.
5. Ensure compliance with anti-money laundering (AML) requirements.
FAQs on Tax Incentives for Foreign Investors
Q: Do foreigners pay more tax than locals?
A: No, tax rates are the same for residents and non-residents.
Q: Is there an inheritance tax in Cyprus?
A: No, it was abolished in 2000.
Q: Can property purchases grant residency?
A: Yes, under the Permanent Residency by Investment scheme.
Q: Are there tax breaks on rental income?
A: Yes, deductible expenses reduce taxable rental income.
Q: Does Cyprus have double tax treaties?
A: Yes, with over 65 countries.
Final Recommendations
Foreign investors benefit significantly from Cyprus’s tax-friendly environment. By leveraging double tax treaties, exemptions, and residency schemes, investors can maximise returns while minimising liabilities.