In recent years, a growing number of foreign entrepreneurs have grappled with new income tax regulations for companies in Cyprus. These developments have left a substantial impact on various economic and business structures. This naturally prompts a fundamental question: in light of the new income tax law in Cyprus, what tax liabilities do companies bear on their income?
In 2023, Cyprus is no longer considered a tax haven. The change has been driven by the combination of increased corporate tax rates, transparent registries of beneficiaries, and the requirement for businesses to demonstrate economic substance within the country. As of today, Cyprus has transitioned from an offshore jurisdiction to an onshore one.
What are the tax liabilities for foreign entrepreneurs in Cyprus in 2023? Is there a need for Cypriot companies to be concerned about Value Added Tax (VAT) payments, and if so, when should these payments be made? Additionally, what strategies can you employ to minimize the income tax burden for companies that are registered in Cyprus in 2023? In the article below, you will find comprehensive answers to these and other questions.
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Company registration in Cyprus in 2023: tax payment methods and deadlines
Those who decide to start their own company in Cyprus are often driven by the desire to protect their assets and intellectual property. What is more, they see it as an opportunity to own a non-resident company in Cyprus, which means they can benefit from an attractive non-domicile tax system.
According to the new rules, every company registered in Cyprus has to follow certain requirements. This includes having economic substance in the country, maintaining an office at the place where you registered your company, and appointing a secretary and a local manager in the incorporation jurisdiction, if possible.
After Cyprus joined the European Union, it was not seen as a tax haven as much as before, although it still has some advantages in that aspect. An interesting fact is that while about 1,000 new companies were formed in Cyprus last year, the first half of 2023 saw a significant increase to 6,000. This highlights the appeal of Cyprus’ tax policies, leading many businesses to consider relocation to Cyprus.
FYI: In Cyprus, the fiscal year matches the calendar year, lasting from January 1st to December 31st. When setting up a new company in Cyprus, make sure to get your TIN within 60 days of your company’s registration date.
How high is corporate tax in Cyprus?
Income tax for businesses in Cyprus in 2023 depends on whether the company is the jurisdiction’s resident or not. Here’s a breakdown of the taxation rules:
- Tax resident companies in Cyprus pay taxes on their income earned both within the country and internationally. The standard corporate tax rate is 12.5%.
- Insurance companies in Cyprus follow the same taxation rules as other resident companies. However, there are exceptions for some firms. If the tax on income from life insurance is less than 1.5% of the total premium, an extra corporate tax is paid from the resulting difference.
- Shipping companies in Cyprus don’t have to pay any taxes if they meet specific requirements as provided for under tonnage tax regulations for eligible shipowners and managers.
- Alternative Investment Funds (AIFs) in Cyprus, along with collective investment companies managed and operated within the country, are considered tax residents and are subject to the regular Cyprus tax regulations.
Non-resident companies don’t pay Cyprus corporate tax on their income.
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Value added tax (VAT) in Cyprus
In Cyprus, Value Added Tax (VAT) is collected for services and goods, including imported items and purchases from the European Union. Let’s take a look at the VAT rates that apply in Cyprus in 2023:
- The standard VAT rate stands at 19%.
- A reduced VAT rate of 9% is used for places like restaurants, cafes, catering services, accommodations, and more.
- A lower VAT rate of 5% is applied in Cyprus in the following cases:
- When it comes to agreements for buying or building residential properties made on or after October 1, 2011. To benefit from this lower rate, the residential property in question shall be used as the primary or permanent residence for the next 10 years.
- For the renovation and repair of private houses that have been in use for at least 3 years since they were built, excluding cases where the total cost of construction materials exceeds 50% of the overall value of the services provided.
- For major repairs and additions to private houses.
When are you allowed not to pay VAT in Cyprus? A 0% VAT rate is applied to these transaction types:
- renting out residential buildings
- most banking, financial, and insurance services
- certain medical services
- certain cultural, educational, and sports events
- postal services
- lottery tickets and coupons for football and horse racing bets
- management services to mutual funds.
You shall submit your VAT returns every quarter. In Cyprus, VAT is paid by the 10th day of the second month immediately following the month that ends the tax period.
Property taxes in Cyprus
The taxes you will pay on your real estate in Cyprus depend on the value of the latter. They include inter alia property transfer tax and stamp duty.
Here’s what you should know about the stamp duty in Cyprus:
- No stamp duty is applicable for the first EUR 5,000.
- A rate of 0.15% applies to purchases ranging from EUR 5,001 to EUR 170,000.
- For a property deal above EUR 170,000, the stamp duty rate is 0.2%.
Property transfer tax in Cyprus is collected when you purchase real estate. Depending on the estimated market value (as shown in the Land Registry), the buyer pays the property transfer tax at the following rates:
- 3% – for properties priced at up to EUR 85,000
- 5% – for properties priced at EUR 85,001 to EUR 170,000
- 8% – for properties priced over EUR 170,001.
In Cyprus, the seller is responsible for paying a property sales tax on the income received, and the tax rate is 0.4%.
With VAT paid in advance, your stamp duty will be reduced by 50%, and you will pay no property transfer tax.
FYI: Local property tax in Cyprus is set by the specific local council or municipality where the property is situated. Capital gains tax in Cyprus is 20% and it is imposed on gains from property disposal. You will pay this tax for any properties not subject to income tax.
Tax payment deadlines in Cyprus in 2023
Take a look at the tax calendar outlining the deadlines for income tax, VAT, personal income tax, and various payments in Cyprus for both businesses and individuals in 2023. With this valuable tool, you will avoid penalties and at the same time punctually file all tax returns, regardless of whether they are submitted in hard or soft copy.
| Date | Requirements | Form |
| January 31 | Dividend Distribution Declaration | TD623 |
| April 30 | Payment of insurance premium tax for life insurance companies | TD199 |
| May 31 | E-submission of total payrolls for the previous year by employers | TD7 |
| June 30 | Deductions for special defense contributions and general healthcare system contributions for the first 6 months to be made from rental payments | TD601 |
| July 31 | Filing an electronic PIT declaration for the previous year. Submitting a preliminary income tax declaration for 2023 and making the initial payment. | TD1 |
| August 1 | Settlement of the tax balance for the previous year by companies and individuals who submit audited financial statements | IR158 |
| December 31 | Deductions for special defense contributions and general healthcare system contributions to be made from interest income, rental payments, or dividends | TD601 |
| At the end of each month | Social insurance and general medical contributions deducted from employee salaries in the last month | TD601 |
| Tax withheld in the previous month from payments to tax residents who are not Cyprus citizens | TD11 | |
| By the 10th day of the second month following the end of the quarter | Social insurance contributions for self-employed persons | — |
| By the 10th day of the second month after the end of the VAT payment period | VAT return | — |
| By the 10th day of the month following the end of the VAT payment period | The Intrastat form or intra-EU trade statistics shall be submitted in a soft copy (electronically) | — |
Dynamic changes in Cypriot taxation
The sovereign island nation fully backs the initiatives of the European Commission and OECD in countering aggressive tax planning. Consequently, in 2022–2023, the jurisdiction has implemented additional tax measures to monitor tax payments. The latter dealt with specific forms of income, namely, dividends, interest, and royalties paid by Cypriot legal entities to residents of nations that are currently not cooperating with the EU.
Taxes on dividends, interest, and royalties paid to legal entities registered or resident in countries listed as non-cooperating (Appendix I of the EU list), are imposed starting January 1, 2023, at the following rates:
- dividend tax: 17%
- interest tax: 30%
- royalty tax: 10%.
Nevertheless, there exist several exceptions, as well as current Double Taxation Agreements, even with countries blacklisted by the EU. For more information on the subject, you are welcome to contact the Q Wealth team.
The second amendment deals with the tax residency of Cypriot companies. In 2023, the following companies are recognized as tax residents of the jurisdiction:
- those registered and operated within Cyprus
- those registered in Cyprus but managed and controlled from another country, provided they are not tax residents of any state globally.
To put it simply, before 2023, the key residency criterion centered around business management. However, today, non-residents who don’t pay taxes in any country worldwide automatically become taxpayers in Cyprus. The source of income and the location of business management are irrelevant for such companies.
To pick the right relocation jurisdiction for both you and your business, don’t hesitate to seek personal consultation and recommendations from Q Wealth experts.
Cyprus taxes for individuals in 2023
When it comes to personal income in Cyprus, a floating tax rate for Personal Income Tax is employed, with the resulting amount to pay in taxes based on the income you receive. Here’s the breakdown of how much resident taxpayers in Cyprus are obliged to pay as income tax on their global income in 2023:
- No tax is levied on income ranging from EUR 0 to EUR 19,500.
- Any income falling between EUR 19,501 and EUR 28,000 is subject to a 20% tax rate.
- For earnings from EUR 28,001 to EUR 36,300, the applicable tax rate is 25%.
- Income ranging from EUR 36,301 to EUR 60,000 is subject to a Personal Income Tax of 30%.
- Those individuals earning EUR 60,000 or more pay the highest tax rate of 35%.
There’s a special tax regime for retirees. They pay a 5% tax on pension payments exceeding EUR 3,420 per month.
Tax penalties for failure to pay tax in Cyprus
In 2023, penalties for delayed or unpaid taxes in Cyprus stand at 2.25% of the outstanding amount. Additionally, failure to meet the tax return submission deadline may lead to fines, commencing at EUR 100 per month of delay and potentially escalating to a maximum of EUR 1500.
Strategic tax planning in Cyprus for individuals and legal entities
The taxation landscape in Cyprus has seen transformation, especially in terms of income taxes, value-added tax (VAT), and stamp duties. These changes have predominantly emerged from the adoption of EU standards. The Cypriot government is actively working to entice foreign investors, offering them additional tax perks and the opportunity to acquire European citizenship.
If you’re thinking about living in Cyprus, it’s a good idea to compare the taxes you might have to pay here with other countries. Alternatively, you can get advice from Q Wealth seasoned experts.
Even though Cyprus is not a tax-free offshore haven any longer, it’s still appealing for investors. After all, Cyprus tax rates and rules are flexible, let alone multiple other advantages that the jurisdiction comes with. If you want to learn more about tax rates in Cyprus and why it’s a good tax residence choice, you are welcome to visit the country section for Cyprus on our website.
For tailored consultations on banking services, business setup, and investment schemes, feel free to connect with the Q Wealth team via our online chat or email info@qwealthreport.com.
What major taxation changes is Cyprus making in 2023 for dividends, interest, and royalties?
Since January 1, 2023, Cyprus is introducing revised tax percentages for dividends, interest, and royalties paid to businesses from non-cooperative nations that are blacklisted by the EU. These revised rates are 17% for dividends, 30% for interest, and 10% for royalties.
What is the corporate income tax rate in Cyprus?
As of 2023, the corporate income tax rate for companies incorporated in Cyprus and considered tax residents of the country is 12.5%.
Do Cypriot companies have to pay VAT?
In line with standard regulations, Cypriot companies are subject to a 19% VAT rate. Lower rates of 5% and 7% apply to certain types of goods and services. Additionally, a zero-rated VAT (0% VAT) is in place for non-residents, as well as for residential rent, specific financial services, most medical services, lotteries, mutual fund management, and related sectors.
