The Tax System in Cyprus
For the purposes of taxation on income "Tax Resident of Cyprus" is defined as:
Any person (natural or legal) who is not a Tax Resident of Cyprus, for each tax year, is being taxed charged a tax on income obtained or derived from sources within Cyprus only.
Legal person – a non-domicile company, having a permanent establishment in the Republic of Cyprus, may choose to qualify for tax treatment as a resident of Cyprus.
Voluntary registration to the Tax Department's Registry (for VAT purposes) may be carried out under terms and conditions, e.g. a person who is not permanently established in the Republic of Cyprus but carries out taxable activities in the Republic of Cyprus.
Cyprus offers a wide range of tax advantages to companies conducting business on the island. Such advantages derive from the country's favourable legislation compliant with OECD and EU requirements, as well as from the wide network of double taxation treaties with more than 60 countries involved.
Briefly, the main provisions of corporate taxation are:
Personal Income Tax
Individuals are subject to a scaled assessment rate on their annual income, starting with 20%, 25%,30%, and ending at 35%, with the first €19500 of income being non-taxable. One of the lowest statutory personal income tax rates in the EU.
Below are briefly described some of the main provisions of Income Tax applied to Individuals (Natural Persons) :
Income from the sources described below are NOT taxable under CERTAIN rules and conditions:
Value Added Tax
Value Added tax is levied at a rate of 19% (normal), 9% / 5% (reduced), as well as 0% (zero rate) on specific goods and services, on all supplies of goods and provision of services carried out in the Republic, the acquisition of goods from other Member States and the importation of goods from third countries.
Visitors from non-EU countries can claim a refund of VAT paid on their purchases of goods in Cyprus upon their departure from the country, provided that the purchased goods are transported outside Cyprus (and the EU) in their personal luggage.
Cyprus international trusts enjoy important tax advantages, providing significant tax planning possibilities: