Tax Advantages of Investing in Cyprus

What Every Investor Should Know

Cyprus has long held a strategic appeal for international investors, not only for its prime geographic location bridging Europe, Asia, and Africa but also for its favourable tax framework. With a robust legal system based on English common law, a competitive corporate tax rate, and a suite of tax incentives for individuals and businesses, Cyprus offers a fertile ground for investment and financial planning.

In this comprehensive guide, we explore the key tax advantages that make Cyprus an attractive destination for investors. From corporate taxation and double taxation treaties to the highly attractive non-domicile (non-dom) regime and capital gains exemptions, this article outlines the fiscal landscape that supports investment success on the island.

1. Corporate Taxation in Cyprus

Cyprus boasts one of the lowest corporate tax rates in the European Union, with a flat 12.5% corporate income tax. This has made the island an increasingly popular jurisdiction for holding companies, financial services firms, and multinationals seeking to optimise their tax structures while maintaining compliance within the EU framework.

Key Highlights:

• Corporate tax applies to resident companies, which are taxed on their worldwide income.
• Non-resident companies are only taxed on Cyprus-sourced income.
• There is no tax on dividends received from overseas subsidiaries, subject to specific anti-avoidance provisions.

In addition to the low corporate tax rate, companies benefit from exemptions and deductions, such as:

• 80% exemption on income derived from qualifying intellectual property (IP) under the IP Box regime.
• Group relief allowing the offset of tax losses within a group of companies.
• Deduction of interest expense, subject to certain thin capitalisation rules.

2. Double Taxation Treaties (DTTs)

Cyprus has signed over 65 double taxation treaties with countries around the globe, including the UK, USA, China, India, Russia, South Africa, and most EU member states.

These treaties serve to avoid the double taxation of income earned in one jurisdiction and taxed in another, by providing relief mechanisms such as tax credits or exemptions. For investors, this reduces the tax burden significantly and adds legal clarity when structuring cross-border investments.

Benefits of DTTs for Investors:

• Reduced or zero withholding taxes on dividends, interest, and royalties.
• Greater certainty on tax treatment in both Cyprus and treaty countries.
• Enhanced planning for international business operations, including the use of Cyprus as an intermediary jurisdiction for routing investments.

3. Non-Domiciled (Non-Dom) Regime

Introduced in 2015, Cyprus’s non-dom regime has transformed the island into a tax-efficient base for high-net-worth individuals and international entrepreneurs. The regime applies to individuals who are tax residents in Cyprus but are not domiciled there.

Key Tax Benefits for Non-Doms:

• Zero tax on dividends and zero tax on interest income.
• No Special Defence Contribution (SDC) levied on investment income.
• Exemption from capital gains tax, except on the sale of immovable property situated in Cyprus.

To qualify as non-dom:

• An individual must not have been domiciled in Cyprus by origin or choice.
• The status remains valid for 17 years from the date of becoming a Cyprus tax resident.

Combined with the 183-day or 60-day tax residency rule, the non-dom regime makes Cyprus an ideal base for wealth management and global mobility.

4. Capital Gains Tax (CGT) Exemptions

Cyprus’s capital gains tax applies only in limited cases, primarily to gains derived from the sale of immovable property located in Cyprus or shares of companies that directly own such property.

Key Exemptions:

• No CGT on the sale of shares, unless the company owns real estate in Cyprus.
• No CGT on gains arising from overseas property.
• Lifetime exemption of €85,430 on gains from the disposal of a principal private residence, subject to specific conditions.
• Gains from the disposal of property between family members are also typically exempt.

This selective approach to CGT enables a more tax-efficient structuring of assets, especially for individuals or companies managing international portfolios.

5. Other Personal Tax Incentives

In addition to the non-dom regime, Cyprus provides further incentives to attract foreign talent, professionals, and entrepreneurs:

Income Tax Exemptions:

• 50% income tax exemption for individuals earning over €55,000 annually for the first 17 years of residence.
• 20% exemption (or €8,550, whichever is lower) for employment income earned in Cyprus by new residents for up to 5 years.

Pension Income:

• Expatriate pension income is taxed at a flat rate of 5% for amounts over €3,420 annually, with the option to be taxed under normal income tax bands.

These personal tax breaks help position Cyprus as a highly attractive jurisdiction for relocating professionals and digital nomads.

6. VAT and Property Tax Considerations

Cyprus applies a standard VAT rate of 19%, with reduced rates of 5% and 9% for specific goods and services.

For property investors:

• Reduced 5% VAT applies on the first 200m² of a new principal residence.
• No inheritance tax in Cyprus, which facilitates efficient intergenerational wealth transfer.

Local property taxes have been largely streamlined, and Immovable Property Tax was abolished in 2017, further reducing the overall burden on property owners.

7. Trusts and Estate Planning

The Cyprus International Trust (CIT) regime offers robust benefits for asset protection, estate planning, and tax optimisation. CITs can:

• Accumulate income free from Cyprus taxation.
• Distribute income to non-residents without additional tax.
• Be structured flexibly for succession planning, shielding assets from forced heirship rules.

Trusts in Cyprus benefit from both local legislation and the island’s status as a Common Law jurisdiction, providing clarity and legal strength for high-net-worth families and fiduciary planners.

8. Compliance, Transparency, and Substance

Cyprus has made substantial progress in enhancing transparency and aligning its framework with EU and OECD standards. This includes:

• Adoption of CRS (Common Reporting Standard) and FATCA.
• Enhanced economic substance requirements for companies.
• Establishment of UBO (Ultimate Beneficial Owner) registries.

This modernised and compliant environment assures investors that Cyprus is a credible jurisdiction for legitimate, sustainable tax planning.

Conclusion

The tax framework in Cyprus is not only competitive but also structured to support a wide range of investment vehicles, asset protection strategies, and business growth plans. From its low corporate tax rate and vast treaty network to the non-dom regime and CGT exemptions, Cyprus offers a compelling fiscal environment for global investors.

With a stable legal system, EU membership, and continued efforts to remain transparent and compliant with international standards, Cyprus remains a leading destination for tax-efficient investing. Whether you’re an individual managing wealth or a company expanding internationally, the island’s tax advantages are hard to ignore.

Need Help Navigating Cyprus Tax for Investments?
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