Cyprus Residence and Liability for Taxation
Residence
is defined as presence in the country for more
than 183 days in a calendar year (which is the
tax year), and then applies to the whole year.
Resident individuals are subject to tax on their
world-wide income; non-residents are taxed only
on certain types of income arising in Cyprus.
After the EU finally agreed its Tax Directive in June, 2003, Cyprus
announced that it would implement the 'information
sharing' provision of the Directive on entry
to the Union in 2004. This means that information
about savings returns received in Cyprus
by nationals of other EU countries is now
being passed to the tax authorities in the
individuals' home countries.
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Cyprus Income Tax
Income
tax is levied on world-wide income. Such
income includes employment income (including
benefits), profits from a business activity,
rentals from immoveable property and royalties,
and pensions received (pensions from abroad
may be taxed at the rate of 5% for amounts
in excess of a designated amount, see below).
See
Double Tax Treaties for details of Treaty exemptions
and reliefs.
Various
deductions are permitted, including some in
respect of share ownership; and there are
personal allowances. Married persons are taxed
separately.
Non-residents of Cyprus are taxed in Cyprus on employment income
(including benefits), in relation to services
rendered in Cyprus, profits from a business
activity which is carried out through a
permanent establishment in Cyprus, rentals
from immoveable property situated in Cyprus,
and pensions in respect of employment exercised
in Cyprus, with the exception of pension
paid from a fund established by the Government
or local authority.
Chargeable
income (after all allowances) is taxed (from
2008) as follows:
| –
up to EUR19,500
|
nil |
| –
from EUR19,501-28,000 |
20% |
| –
from EUR28,001-36,300 |
25% |
| –
above EUR36,300 |
30% |
Pension
income is charged at 5% on amounts over EUR3,417
pa provided that the individual is neither
Cypriot, nor has economic activity on the
island.
A
'Special Defence Contribution' applies to
certain types of income as follows:
- 3%
on: interest received by provident funds;
the profits of semi-governmental bodies;
rental income received by a Cyprus individual
or corporate resident from immovable property
(after deducting 25%); interest received
by an individual with a yearly income below
EUR11,960 (at the time of writing) and interest
received by individuals from Government
bonds and Government savings certificates.
- 10%
on: interest received by a legal entity
unrelated to its normal business or by an
individual with income over EUR11,960 pa.
- 15%
on:dividends received by individuals in
Cyprus.
Under
legislation adopted in late 2009, interest
received by individuals through business operations
will be subject to regular income tax, but
not the Special
Defence Contribution;
non-business interest income will be subject
to the SDC at 10%, but not to income tax.
Certain other special regimes operate for
non-resident entertainers, sportspeople and
experts.
Individuals exercising an office or employment in Cyprus, whose residence
was outside Cyprus before the commencement
of the employment, are granted a tax exemption
for 20% of their remuneration, or EUR8,000
(at the time of writing), whichever is the
lower, during a period of three years starting
at the beginning of the year following the
year of commencement of their employment.
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Cyprus Capital Gains Tax
Capital gains tax is charged at the rate of
20% on gains arising from the disposal of
immovable property in Cyprus or the disposal
of shares of companies which own immovable
property in Cyprus. Gains from the sale of
shares listed on the stock exchange are excluded
from capital gains tax.
The
taxable gain is the difference between the
proceeds of sale and the original cost of
the property plus the cost of improvements
cost, adjusted for inflation from the date
of acquisition.
Some disposals are exempt from taxation, including transfer by reason
of death and gifts between relatives. There
are some circumstances in which rollover relief
is available if a gain is used for the purchase
of a further property.
The first EUR85,430 (at the time of writing) of a gain made by an
individual on disposal of a personal property
is exempt from tax. This exemption is available
only once. The immovable property tax is paid
on 30th September every year.
Capital
gains tax does not apply to profits from the
sale of overseas real estate by non-residents,
by offshore entities, or by residents who were
not resident when they purchased the asset.
Under the Capital Gains Tax (Amendment) Law, No. N119(I) of 2002,
effective 1st January 2003, gains accruing from
disposal of shares listed on any recognised
Stock Exchange will be exempted from tax.
Gains accruing from disposal of immovable property held outside Cyprus
and shares in companies, the property whereof
consists of immovable property held outside
Cyprus, will be exempted from capital gains
tax.
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Cyprus Estate Duty
Estate
duty was abolished in 2000.
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Cyprus Real Estate Taxes
There
is an annual real estate tax based on the market
value of property (it can be divided between
multiple owners):
–
up to EUR170,860
– EUR170,861-427,150
– EUR427,151-854,300
– Above EUR854,300 |
nil
2.5%
3.5%
4% |
Further
property taxes between 0.1% and 0.5% per annum
are levied by local authorities.
Real
estate transfer tax is payable on the actual
consideration or on market value, whichever
is the higher, by the transferee.
There
is a transfer tax on gifts of real estate within
a family, but the amounts are quite small.
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Cyprus Customs Duties
Customs
Duties are imposed under the Customs and Excise
Duties Law Cap 34, 1975. There are quite high
duties on many consumer items, including motor
vehicles, furniture, confectionery and cosmetics;
however, as a result of the accession of Cyprus
to the EU, import duty has been abolished on
most goods coming from the EU.
There
are excise duties on alcohol, tobacco, motor
vehicles, petrol and soft drinks.
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