Investment Tax

Investing in Cyprus: Investor Taxation Basics

Cyprus maintains a competitive tax framework designed to attract foreign direct investment and high-net-worth individuals. For the 2025/2026 period, the tax system remains characterized by its broad range of exemptions for non-domiciled individuals and one of the lowest corporate tax rates in the European Union. Understanding your tax residency status is the first step in determining your fiscal obligations in the Republic.

Determining Tax Residency

In Cyprus, tax residency for individuals is determined by the duration of physical presence within a calendar year (January 1 to December 31). There are two primary rules:

• The 183-Day Rule: An individual is considered a tax resident if they spend more than 183 days in Cyprus during a calendar year.
• The 60-Day Rule: An individual can be considered a tax resident if they spend at least 60 days in Cyprus, provided they do not reside in any other single state for more than 183 days, are not a tax resident of another state, maintain a permanent residence in Cyprus (owned or rented), and carry out business or are employed in Cyprus.

Tax residents are taxed on their worldwide income, while non-residents are only taxed on income generated from sources within Cyprus.

The Non-Domicile Regime

The "Non-Domicile" (Non-Dom) status is a significant incentive for foreign investors moving to Cyprus. Under the Special Defence Contribution (SDC) law, individuals who are tax residents but non-domiciled in Cyprus are exempt from taxation on specific types of investment income for a period of 17 years.

Exemptions under Non-Dom Status

Qualifying individuals are exempt from the Special Defence Contribution on the following:

• Dividends: 0% tax rate (compared to 17% for domiciled residents).
• Interest Income: 0% tax rate (compared to 30% for domiciled residents on passive interest).
• Rental Income: 0% SDC rate (though standard income tax may still apply).

To qualify as non-domiciled, an individual must generally not have been a Cyprus tax resident for at least 17 out of the last 20 years prior to the tax year in question. Detailed information can be found on the Official Cyprus Tax Department website.

Personal Income Tax and Capital Gains

Cyprus employs a progressive tax scale for personal income. The first €19,500 ($20,475 USD, Jan 2026) of annual income is tax-free. This threshold applies to all individuals regardless of residency status.

Personal Income Tax Brackets (2025/2026)

• €0 – €19,500 ($20,475 USD, Jan 2026): 0%
• €19,501 – €28,000 ($29,400 USD, Jan 2026): 20%
• €28,001 – €36,300 ($38,115 USD, Jan 2026): 25%
• €36,301 – €60,000 ($63,000 USD, Jan 2026): 30%
• Over €60,000 ($63,000 USD, Jan 2026): 35%

Capital Gains Tax (CGT)

Capital Gains Tax is specifically targeted at immovable property located in Cyprus. Profits from the disposal of real estate in Cyprus are taxed at a flat rate of 20%. Notably, gains from the sale of foreign real estate or the sale of shares in companies that do not own immovable property in Cyprus are generally exempt from CGT.

Corporate Tax Rate

For investors establishing entities, the corporate income tax rate is set at 12.5% on net profits. Cyprus also offers a "Notional Interest Deduction" (NID) for new equity introduced into a company, which can significantly reduce the effective tax rate. Furthermore, profits from the sale of securities (shares, bonds, debentures) are generally exempt from corporate tax.

Social Contributions and GESY

All tax residents, including those with Non-Dom status, are required to contribute to the General Healthcare System (GHS or GESY). These contributions are mandatory and calculated as a percentage of various income types.

• Rental Income, Dividends, and Interest: 2.65%
• Employment Income (Employee): 2.65%
• Employment Income (Employer): 2.90%
• Self-employed: 4.00%

Administrative Steps for Investors

Investors must follow specific steps to ensure compliance with the Cyprus Tax Department:

1. Obtain a TIC: Apply for a Tax Identification Code (TIC) through the Ariadni Portal or the Tax Department once residency is established.
2. Non-Dom Application: Submit form T.D. 38 to formally declare non-domicile status.
3. Annual Tax Return: File the annual Personal Income Tax Return (T.D. 1) via the TaxisNet system. The deadline is typically July 31st of the following tax year.

Note: Tax regulations are subject to legislative changes. It is recommended to consult the Ministry of Finance for the most recent updates regarding bilateral double taxation treaties.