Cyprus

Enjoying a central Mediterranean location within easy reach of Europe, The Middle East and Africa, this beautiful island boasts 160 beaches, many of which are rated amongst the best in the World. Add to this 340 days of glorious sunshine and blue skies with average summer temperatures of 30-33 degrees Celsius and winter temperatures of 13-15 degrees Celsius and you will understand why many Ex-pats make Cyprus their home of choice.

There are also a multitude of things to see and do from skiing in the mountains of Troodos in winter to visiting the quant Cypriot inland villages and monasteries and ancient sites and monuments going back to the occupation of the island by the Mycenaean Greeks in the 2nd millennium BC and subsequently by the empires of the Assyrians, Egyptians and Persians.

Add to this a very generous tax system and a relatively low cost of living compared to most other European countries and you have the recipe for the perfect place to live and work.

Residency | tax rates

You are considered a resident of Cyprus if you spend a period of 183 days or more in a calendar year in Cyprus.

If you are considered a tax resident in Cyprus, you are subject to tax on your worldwide income. If you are not tax resident in Cyprus, you are subject to tax only on certain types of income accrued or derived from sources in Cyprus

You can also be considered a resident of Cyprus if you:

Spend at least 60 days in Cyprus
Do not spend more than 183 days in any other country
Are employed in Cyprus
Maintain a permanent residence in Cyprus (owned or rented)
Are not a tax resident of any other country.

Tax rates

Cyprus is considered as one of the most attractive regimes, especially when compared to other European countries. As a tax resident of Cyprus, your personal income is taxed according to the following scale:

ANNUAL INCOME

INCOME TAX RATES

Up to €19,500

€19,501 – €28,000

€28,001 – €36,300

€36,301 – €60,000

€60,001+

20%

25%

30%

35%

Special Defence Contributions (SDC)

Certain income sources are no longer subject to Personal Income Tax rates in Cyprus and are instead subject to Special Defence Contributions (SDC). Having said that., since 9th July 2015, SDC only applies if you are domiciled in Cyprus. If you are not domiciled in Cyprus, you are exempt from SDC.

You are deemed to be domiciled in Cyprus if you have:

A Cyprus domicile of origin*;
Acquired a domicile of choice in Cyprus;
Been resident in Cyprus for 17 out of the last 20 tax years

*An individual who has a Cyprus domicile of origin but who has acquired a domicile of choice elsewhere, and who has not been resident in Cyprus in any of the previous 20 Cyprus tax years is not considered domiciled for purposes of defence contributions.

If you are liable to SDC, these will apply to the following:

30% on Bank interest;
17% on Dividends;
3% on Rental Income* (after allowing a deduction of 25% on the gross rental income).

*Rental income is also subject to Personal Income Tax Rates.

Capital Gains Tax (CGT)

You are not liable to Capital Gains Tax (CGT) in Cyprus on the sale of shares. You are only subject to CGT (where the disposal is not subject to income tax) on gains from the disposal of immovable property situated in Cyprus. The sale of immovable property situated outside of Cyprus is not subject to CGT in the hands of a Cypriot resident. CGT is applied at a flat rate of 20% and also arises if:

Shares of private companies whose property consists of immovable property situated in Cyprus are sold;
Shares of companies which either directly or indirectly participate in a company or companies which own immovable property situated in Cyprus and at least 50% of the market value of such shares is derived from the relevant property;
A sale agreement of immovable property situated in Cyprus.

Exemptions

There are a number of exemptions on the disposal of immovable property which are not subject to CGT. These include:

Transfers arising on death
Gifts made from parent to child or between husband and wife or to relatives within the third degree of kindred
Gifts by a family company to its shareholders, provided such property was originally acquired by the company by way of donation. The property must be kept by the donee for at least three years
Gifts to charities, the Government, political parties or to a local authority for educational purposes
Transfer as a result of reorganizations
Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws
Expropriations
Exchange of properties where the values of the immovable properties being exchanged are equal.

Deductions

	€
sale of own residence (under certain conditions)	85,430
sale of agricultural land by a farmer	25,629
other sales	17,086

The above exemptions are granted only once for each taxpayer and not for each sale. An individual claiming a combination of the above is allowed a maximum of € 85,430.

Gift and Inheritance Tax

The beauty of Cyprus’s gift and inheritance tax regime lies in its simplicity compared with many other countries, both inside and outside the European Union. This makes Cyprus a highly attractive jurisdiction, particularly for high net worth individuals.

In Cyprus, there is no gift or inheritance tax. You can pass you assets throughout your lifetime or on your death to your heirs and beneficiaries with them not having to pay any local tax in Cyprus.

Having said that, there may be transfer fees that must be paid to the tax authorities. Furthermore, if you have assets in more than one country, different inheritance tax regimes may apply (the double tax treaty or the national tax rules will determine where and how succession tax is paid). It is therefore recommended that you seek advice on the subject to ensure you are passing your wealth to your chosen beneficiaries in the most tax efficient way.

Forced Heirship

Succession law in Cyprus dictates that, on your death, your estate will be divided among direct family members and cannot be left freely to whomever you like. This is known as forced heirship.

However, since the application of EU Succession Regulation 650/2012 – (also known as “Brussels IV”) on 17 August 2015, it is possible for you to opt (through your Will) for the succession law of your country of nationality to apply on your death, instead of that of Cyprus.

Pension Income

In Cyprus, foreign pension income is taxed very favourably in one of the following ways:

At a flat rate of 5% on amounts over €3,420, or;
Added to your annual income and taxed at normal personal income tax rates.
Domestic pension income is taxed at normal personal income tax rates. Neither are subject to Special Defence Contributions.

UK Pensions

In March 2018, a new Cyprus/UK Double Taxation Convention (DTC) was signed which dictated that, from 1st January 2019, UK government service pensions would be taxed in the UK rather than in Cyprus (unless the individual is a Cypriot national). This signified that, under the new DTC rules, UK expatriates living in Cyprus would have to pay UK tax on their UK government service pension, instead of the more favourable Cyprus tax rates.

Since this announcement was released, a lot of pressure was put on the respective Governments to reverse this decision. This has resulted in the UK and Cyprus Governments to amend the new DTC to once more allow individuals to choose which jurisdiction their UK government service pension is taxed under. However, it is important to note that this reversal is not indefinite – the option to choose between the two can only be made from 1st January 2019 to 31st December 2024.

In addition to the above, there are various tax benefits to holding a QROPS in Cyprus. These include:

No tax in Cyprus on transfer into QROPS
No tax on lump sum withdrawals, even if taken whilst a Cypriot resident. If the entire pension fund is taken as one lump sum, it would be exempt from tax in Cyprus
Where lump sum payments are made on a regular basis, this will be regarded as pension income and taxable at either 5% on the excess of €3,420 or normal personal income tax rates

Qualifying Recognised Overseas Pension Scheme (QROPS)

If you are a British expatriate, you can benefit from transferring your UK pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS). There are numerous benefits in doing so such as:

Consolidation and flexible access to your pension funds
Wider range of investment options, allowing you to benefit from greater diversification and potentially better returns
The ability to denominate your pension in Euros (or any other currency), in line with your living expenses
Freedom from UK rules
Estate planning flexibility

Note: Pension Commencement Lumps Sums are not taxable in Cyprus or the UK.

If you are a UK expatriate and have a UK pension, it is important to seek personalised advice to determine whether transferring your pension to a QROPS is the right solution for you.

Life Assurance Policies

Cyprus is one of very few countries in the European Union which does not charge tax on income or gains received from a life assurance policy. In fact, where no tax relief has been claimed in Cyprus on any premiums paid, there is no income tax or defence contributions on any withdrawals from a life assurance policy.

This mean that, irrespective of how much your investments within the life assurance policy have grown by, when you make a withdrawal, you are not liable to any tax on any of the growth that is realised.Unlike most countries in the EU, life assurance policies in Cyprus can be used to reduce your taxable income. However, where this is the case, tax would then be applied on any withdrawals made. The rate at which tax is applied depends on how long the policy has been held:

0 to 3 years	30% of the premiums paid on which tax relief was obtained will be liable to income tax at normal scale rates
4 to 6 years	20% of the premiums paid on which tax relief was obtained will be liable to income tax at normal scale rates
6+ years	No income tax on any withdrawals

Disclaimer:

The content of this guide is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing in this guide constitutes a solicitation, recommendation, endorsement, or offer by MWC Group or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the laws of such jurisdiction. Please contact your own lawyer, accountant, or tax professional with any specific questions you have related to the information provided that are of legal, accounting or tax nature. The content of this guide is of a general nature and does not address the circumstances of any particular individual or entity. All information of this guide is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information. By reading this guide, you agree not to hold MWC Group, its affiliates or any third party service provider liable for any possible claim for damages arising from any decision you make based on information or other content made available to you by this guide.

REGION

Residency | tax rates

You can also be considered a resident of Cyprus if you:

Tax rates

Special Defence Contributions (SDC)

Capital Gains Tax (CGT)

Exemptions

There are a number of exemptions on the disposal of immovable property which are not subject to CGT. These include:

Deductions

Gift and Inheritance Tax

Forced Heirship

Pension Income

UK Pensions

In addition to the above, there are various tax benefits to holding a QROPS in Cyprus. These include:

Qualifying Recognised Overseas Pension Scheme (QROPS)

Note: Pension Commencement Lumps Sums are not taxable in Cyprus or the UK.

Life Assurance Policies

Disclaimer:

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REGION

Cyprus

Residency | tax rates

You can also be considered a resident of Cyprus if you:

Tax rates

Special Defence Contributions (SDC)

Disclaimer:

What we do

Asset Management

Retirement Planning

Leaving Switzerland

Family Protection

International Property Finance

Asset
Management

Retirement
Planning

Family
Protection