26.10.2024 · Updated in 2026
TAXES
Taxes in Cyprus for individuals and companies
Why entrepreneurs and highly qualified specialists choose Cyprus as their country of tax residence
In this article we look in more detail at how the Cyprus tax system works
Cyprus is one of the most attractive tax jurisdictions in the European Union, both for individuals and for companies.
The article was updated in 2026 to reflect the Cyprus tax reform in force from 1 January 2026. The corporate income tax rate is now 15% (it was 12.5% until the end of 2025), and for IT companies under the IP Box regime the effective rate is only about 3%. The personal income tax rate for employees starts at 0% for annual income up to €22,000.
What it means to be a Cyprus tax resident
A Cyprus tax resident pays tax on income earned in Cyprus and abroad. Non-residents pay tax in Cyprus only on income from Cyprus sources. They pay tax on the rest of their income in their country of tax residence.
The 183-day rule means that a person spends more than 183 days in the Republic of Cyprus in a calendar year.
For individuals, the 183-day or 60-day rule applies to residency.
The individual does not reside in another state for more than 183 days a year, i.e. is not a tax resident elsewhere.
The 60-day rule requires several conditions to be met:
Lives in Cyprus for at least 60 days a year.
Is employed in Cyprus or owns a company that is a Cyprus tax resident.
A legal entity becomes a tax resident if it is managed and controlled from Cyprus.
Owns residential property in Cyprus.
If this rule is not observed, additional taxes may be assessed in the country where the business managers actually live. Examples of this happening are far from rare.
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Personal income tax
Cyprus has a progressive personal income tax scale. It is paid by individuals who are Cyprus tax residents, whether employed or self-employed.
The rate depends on annual income
- up to €22,000 - 0%
- €22,001 - €32,000 - 20%
- €32,001 - €42,000 - 25%
- €42,001 - €72,000 - 30%
- over €72,000 - 35%
Personal income taxpayers in Cyprus are entitled to numerous deductions:
- interest on deposits - 100%
- dividends - 100%
- profit from the sale of securities - 100%
- salary earned outside Cyprus for work exceeding 90 days a year - 100%
- pension payments from life insurance funds - 100%
- foreign pensions - €3,420 a year
- widows' pensions - €19,500 a year
- trade union fees - 100%
- life insurance - 7% of the insurance premium
- rental income - 20%
- donations to charitable organisations - 100%
- audited losses for the previous 5 years (for the self-employed) - 100%
- child benefits - 100%
If a company director or shareholder gives a loan from the company to themselves or a relative, the tax authorities will also treat it as personal income. The taxable base in this case is 9% per year of the loan amount received.
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Corporate income tax
The basic corporate tax rate in Cyprus is 15% (from 1 January 2026; it was 12.5% before). It is paid by all legal entities except non-profit and charitable organisations.
Here are the main available deductions:
- Interest income from non-core activities — 100%
- Dividends — 100%
- Profit from the sale of securities — 100%
- Capital gains from the sale of intellectual property — 100%
- Profit of a company's permanent establishment outside Cyprus — 100%
- Foreign exchange gains (except profit from trading derivatives on the FOREX market) — 100%
- Expenses incurred in carrying out business activity — 100%
- Charitable expenses — 100%
- Entertainment expenses — 1% of gross income, up to €17,086 a year
- Depreciation of fixed assets — 3% to 33.3% a year
- Income from the use of intangible assets — 80%
- Amortisation of the cost of creating intellectual property — 20 years or the life of the IP asset (whichever is shorter).
The last 2 items form a special tax regime created to attract IT companies to Cyprus (IP Box).
Cyprus also provides many tax deductions for business. Some apply to all companies, some are available only to IT businesses.
Use of intangible assets means earning profit from your own online services, for example by subscription. Up to 80% of such profit can be excluded from the taxable base. Recalculating with this relief, the effective corporate income tax rate will be not 15% but about 3%.
In addition, the cost of creating an IP asset, such as developers’ salaries and server rental, can be amortised over the following 20 years, which lowers the effective tax burden further.
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Special defence contribution
Individuals and companies that are domiciled residents of Southern Cyprus must contribute to the defence of the republic, which has been in a territorial dispute with the northern part of the island for many years.
Defence contribution is paid on income from several sources and at different rates.
- On interest income from sources in Cyprus and abroad - 17% (3% on qualifying bonds)
- On dividends paid from profits earned after 1 January 2026 - 5% (17% previously)
- On rental income — abolished from 1 January 2026 (3% previously)
- On disguised dividends (private use of company assets) — 10%; the former “deemed dividend distribution” rule has been abolished
Non-domiciled (non-dom) residents of Cyprus are fully exempt from defence contribution. Non-dom status is available to people who were not born in Cyprus and have not lived on the island for 17 of the last 20 years at the time the status is determined.
As in other cases, tax deductions apply:
- Rental income remains subject to ordinary income tax
- Dividends from profits earned before 2026 and paid out by the end of 2031 are still subject to the old 17% rate
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Value added tax
VAT in Cyprus is paid by self-employed entrepreneurs and legal entities. The standard VAT rate is 19%, but various reliefs apply to certain categories of business.
The 183-day rule means that a person spends more than 183 days in the Republic of Cyprus in a calendar year.
For individuals, the 183-day or 60-day rule applies to residency.
Catering, restaurants, hotels and other tourism businesses - 9%
The 60-day rule requires several conditions to be met:
Medical services, food production, supplies of liquefied gas, repair and renovation services, passenger transport - 5%
Media and book publishing, production of devices for the disabled and of refuse collection equipment, organisation of cultural and mass events - 3%
Export of goods, supply and leasing of sea vessels and aircraft - 0%
Any business with annual turnover below €15,600 is exempt from VAT, as are telecommunications companies with turnover below €10,000.
Buying a new residential property is also subject to VAT. When the purchase is made by an individual, a reduced rate of 5% applies; when made by a company, the standard rate of 19% applies.
Remember that an individual first pays VAT in the usual way at 19% and only after the deal is completed can apply for a VAT refund and receive the reduced 5% rate.
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Capital gains tax
The standard rate of capital gains tax is 20%, paid by both individuals and legal entities.
Numerous deductions are provided for different categories of taxpayers:
- sale of residential property (main home) — €150,000
- sale of other property — €30,000
- transfer of property by inheritance - 100%
- gifts between relatives - 100%
- donations to a charitable organisation - 100%
- sale of agricultural land — €50,000
- exchange of agricultural land - 100%
- equal-value exchange of property - 100%
- profit from the sale of shares listed on a stock exchange - 100%;
- profit from the sale of property or shares during a company reorganisation - 100%
- transfer of property of a missing person - 100%
- transfer of property between spouses on a court-ordered divorce - 100%
The main rule affecting individuals is the 20% tax on capital gains on the sale of housing. Property prices in Cyprus have been rising actively in recent years. Since 2026 the lifetime exemption for a main home has been raised from €85,430 to €150,000, but when selling a home in Limassol or Paphos the capital gain may still exceed the statutory deduction.
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Other taxes and fees when buying property
When buying property, individuals and legal entities pay property transfer tax. Until the end of 2025 stamp duty was also payable; it has been abolished from 1 January 2026 (with limited exceptions).
For a property worth up to €85,000 the transfer tax is 3%, from €85,001 to €170,000 it is 5%, and anything above that is 8%.
This means that an apartment worth €300,000 is taxed by a compound formula: the first €85,000 at 3%, then part of the sum at 5% and the remainder at 8%.
This means that an apartment worth €300,000 is taxed by a compound formula: the first €85,000 at 3%, then part of the sum at 5% and the remainder at 8%.
- up to €5,000 - 0%
- €5,001 - €170,000 - 0.15%
- from €170,001 - 0.20% (maximum €20,000)
The fee is paid at the Cyprus Tax Department within 30 days of the deal. Non-payment of the fee is subject to a penalty.
In total, transferring ownership of an apartment worth €300,000 means paying €17,200.
The tax does not have to be paid if VAT was paid when the property was bought. A business that sells property during a reorganisation, restructuring or bankruptcy procedure is also exempt from the tax. However, the income here is capped at €350,000 per business owner.
Until the end of 2025 stamp duty was also paid on a progressive scale (the Stamp Duty Law has been repealed since 1 January 2026, so for new deals this no longer applies):
The Cyprus tax system offers opportunities to optimise personal finances and run a business efficiently. To make full use of its benefits and avoid costly mistakes, timely tax planning is needed.
Choosing the basis for a residence permit, buying a home as an individual or through a company, selecting the optimal tax structure for registering a company: all these decisions have tax consequences. The price of a mistake is tens of thousands of euros of lost profit or overpaid tax.
To avoid such mistakes it is enough to discuss your situation with a lawyer and, if needed, with a specialised auditor in Cyprus.
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