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Last partial update, March 2012

Cyprus Income Tax Rates

  • The tax system in Cyprus is progressive.
    In other words, the higher your income, the higher the rate at which you will pay tax.
    In 2012 the tax rates for an individual are 20% - 35%.
  • There is a reduced rate and/or exemptions that are granted for certain forms of income.
  • The standard rate of Cyprus corporate tax for 2012 is 10%.
  • Residents are subject to defence contribution for passive income, e.g. rental, dividends etc. the rates are 3%-20%.
  • Non residents are exempt from this tax.

Cyprus Income Tax for an Individual

  • An individual is liable for tax on his income as an employee and on income as a self-employed person.
    Tax will be payable on income earned in Cyprus and overseas but excepting a salary received overseas by an individual who meets the test of a "permanent resident" of Cyprus.
    A foreign resident who is employed in Cyprus pays tax only on income earned in Cyprus.
  • To be considered a resident of Cyprus, residence of at least 183 days in Cyprus during any calendar tax year must be established or a life that is centered in Cyprus.
  • An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance due from a salaried worker.
  • A self-employed individual is obligated to make advance payments on income tax that will be offset on filing an annual report. The advance payments are made in three equal payments.
  • Certain payments are deductible from taxable income as detailed below.

Cyprus Individual income tax rates 2012

 

Tax %
Tax Base (EUR)
0
Up to 19,500
20%
19,501-28,000
25%
28,001-36,300
30%
36,301-60,000
35%
60,001 and over
 
 

Cyprus Corporate Tax

  • The basic tax rate in 2012 is 10%.
  • Shipping companies sailing under Cyprus flag pay zero tax on profits and dividend paid.

Cyprus Capital Gains


Capital Gains (for an individual)

  • The profit on the sale of real estate in Cyprus or of shares in an unlisted company that owns real estate, is taxable at the rate of 20%.
  • The tax must be paid on the difference between the cost, adjusted to the increase in the Index up until the date of sale, and the sale price.
  • There is a basic exemption for an individual. The exemption is conditional on the class of the real estate.
  • The amount of the lifetime exemption on the sale of a residential apartment is up to a maximum of EUR 85,430. (when living at least 5 years before sale).


Cyprus Capital Gains (for a corporation)

  • The standard rate of tax for a corporation is 20% for gains from immovable property in Cyprus, or from sale of shares in an unlisted company owning such assets.
    Sale of other shares is tax exempt.

Cyprus Reporting Dates and Payment


The tax year in Cyprus is the year ending on December 31.
Advance payments of income tax are made as specified below:

  • An Individual - An individual whose income is only from a wage is not obligated to file an annual return.
    The employer deducts tax from the employee and transfers it to the Tax Authority every month.
    A self-employed individual must file an estimated return by the August 1 and three equal advance payments must be made according to the estimated return on August 1, September 30 and December 31.
    The return must be filed by April 30.
  • A Limited Company - The principles for the tax return and advance payments are similar to those for an individual.
    The tax payable must be paid by August 1, in the following tax year.
    Arrears in the Payment of Tax - Arrears entail annual interest of 5% for payment up to 6 months from the date determined for payment or 9% if the arrears are in excess of 6 months.

Cyprus Deduction of Tax at Source


Taxation of Employee
The employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.


Cyprus Social Insurance

  • An employee: The employer's contribution is 8.5% of the salary. The employee's contribution is 6.8% of the salary.
  • The maximum amount on which social insurance is payable is EUR 52,104 per year.
  • Self employed pay 12.8% on income.
  • Income in excess of the maximum is exempt from national insurance.

Other deductions for payments to non residents

  • Dividend - 0%.
  • Royalties - 10% (5% for film royalties).
  • Interest - 0%.
  • Technical Services- 10%

The following forms of income are exempt from income tax:

  • An individual's income up to EUR 19,500 per resident.
  • Dividend and interest income. For companies, 50% of interest income from ordinary activities.
  • An individual who receives a pension in Cyprus from overseas employment, to a limit.
  • Part of capital gains that are received by an individual on the sale of real estate - see under the heading "Capital Gains" for fuller details.
  • Gain from sale of securities.
  • Profit from permanent establishment abroad, subject to certain terms.
  • Compensation for death and injury.

Cyprus Tax Relief

  • All forms of tax relief in Cyprus relate to the income of an individual.
  • The following amounts are subject to the definitions in law.

 

Individual Relief

Amount

Donations

With document the whole amount.

Life Insurance

Up to 1/6 of the taxable income.

Child Grant.

A grant of EUR 2,563 per year for a child taking high education.

Professional membership dues

The entire amount is allowable

Income from rent

20% of the income is tax exempt.

Blind Person Grant

EUR 3,417 per year.

 
 

In addition to the deductions/credits listed above, deductions and business expenses may be claimed as specified below:

  • Offset of losses - A loss may be offset forward with no limit.
  • Transactions between associated parties - These are transactions with companies with ownership ties or a significant identity of control. Where transactions with associated parties are concerned, the transactions are meticulously checked by the Tax Authorities, and prices compared to the accepted market prices.

Depreciation of Fixed Assets

- The depreciated balance method or the straight line method are the usual methods of depreciation in Cyprus.
- The following is a Depreciation Table (Straight Line):

Class of Asset

Annual Depreciation (%)

Commercial buildings

3

Industrial buildings

4 (Some hotels are eligible for an
additional deduction of 25% of cost).

Vehicles

20

Computers
Software

20
33.3

Office Equipment

10

Machinery and Equipment

10

 

Cyprus Value Added Tax

  • In most cases, VAT is 17% as from March 1 2012.
  • There are reduced rates of VAT of 5% and 8% that refer mainly to food and agricultural products.books, newspapers, rural transportation etc.
  • VAT is charged on assets and services in Cyprus as well as on imports into Cyprus.
  • Exports are not subject to VAT.
  • There is a liability for VAT when the annual turnover is in excess of EUR 15,600.


Cyprus Inheritance and Gifts Tax:

  • There is no tax on gifts.
  • Inheritance tax, estate duty, was abolished in Cyprus.

 Cyprus Immovable Property Tax

  • The tax is imposed on the real estate market value.
  • The tax rates are 2.5%-4%.
  • Property having a value of less than EUR 170,860 is tax exempt.
  • The tax is paid each year on 30 September.

Cyprus Double Taxation Agreements:

Cyprus is a signatory to a Treaty for the Prevention of Double Taxation with many countries all over the world.
Draft agreements with additional countries are at the discussion stages.
A Double Taxation Prevention Treaty, in principle, enables offsetting tax paid in one of 2 countries against the tax payable in the other, in this way preventing double taxation.
Another important factor is the grant of an exemption or tax at a reduced rate on certain receipts such as interest, royalties, dividends, capital gains and others that are connected with a transaction carried out between parties associated with the Double Taxation Prevention Treaty.
When certain income is taxable under the Cyprus Income Tax Ordinance but there is an exemption (reduced tax) under any Taxation Treaty, the income is taxed, if at all, but only according to the provisions of the Taxation Treaty.

List of Countries, as of January 2012

 

Austria

Armenia

Belarus

Bulgaria

Belgium

Canada

China

Czech Republic

Denmark

Egypt

France

Germany

Greece

Hungary

India

Ireland

Italy

Kuwait

Kyrgyzstan

Lebanon

Malta

Mauritius

Moldova

Montenegro

Norway

Poland

Qatar

Romania

Russia

San Marino

Serbia

Seychelles

Singapore

Slovakia

Slovenia

South Africa

Sweden

Syria

Tajikistan

Thailand

UAE

UK

Ukraine

Uzbekistan

USA