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Cyprus, often called the Mediterranean’s crown jewel, is not only renowned for its breathtaking coastlines and rich cultural heritage but is also an appealing location for real estate investment and business relocation. Positioned at the juncture of Europe, Asia, and Africa, Cyprus provides a highly attractive, business-friendly setting with distinct benefits for local and international investors alike.
The island’s advantageous tax structure, thriving economy, and scenic charm collectively make it a prime destination for investment. For both individuals and businesses aiming to capitalize on tax incentives, investing in property in Cyprus offers a unique blend of beauty and opportunity.
Personal Tax Incentives: Lowering Costs for Residents
Progressive Personal Income Tax Rates
Cyprus offers individuals a particularly favorable tax structure. The first €19,500 of annual income is completely tax-free, which means that residents begin with a substantial tax-free allowance. Beyond this, income is taxed at progressive rates, ranging from 20% to 35%, with the top rate applying only to earnings above €60,000. This structure enables individuals to keep more of their income, contributing to an overall higher standard of living.
Flexible Residency Rules for Tax Purposes
Becoming a tax resident in Cyprus can be achieved through two options: the 183-day rule or the 60-day rule. The first requires individuals to spend over 183 days in Cyprus to gain tax residency, while the 60-day rule provides a more flexible option, requiring a minimum stay of 60 days under specific conditions.
Capital Gains Tax Reliefs
Cyprus incentivizes real estate and other investments by offering capital gains tax exemptions. For instance, capital gains from the sale of certain assets, such as real estate located outside of Cyprus, are generally exempt from capital gains tax, making Cyprus a supportive location for growing wealth through asset sales.
Double Taxation Agreements
Cyprus has signed double taxation treaties with over 65 countries, which reduce withholding tax rates on international income, creating smoother pathways for global investors and businesses operating across borders.
Estate and Gift Tax Benefits
When it comes to preserving wealth, Cyprus offers distinct advantages. Estate duty was abolished in 2000, allowing individuals to transfer assets to the next generation without burdensome taxes. In addition, there is no gift tax in Cyprus, so property or financial gifts can be given tax-free, aiding in wealth preservation across generations.
Business-Friendly Tax Environment
Competitive Corporate Tax Rates
Cyprus’s corporate tax rate, set at 12.5%, is among the lowest in the EU. This rate makes the island highly appealing for businesses looking to lower tax obligations while operating within the European market.
Dividend Tax Benefits
Cyprus’s tax policies support businesses with exempted dividend income, making it possible to bring profits from subsidiaries to Cyprus-based parent companies tax-free under certain conditions, enhancing financial efficiency.
Tax Relief on Royalty Income and IP
Cyprus promotes intellectual property (IP) investments with tax exemptions. Royalty income generated from IP, such as patents and trademarks, is tax-free. Additionally, the IP regime offers an 80% exemption on net income from qualifying IP assets, providing an ideal setting for companies focused on research, development, and IP-related ventures.
Tax Treaty Network for Businesses
Like individuals, businesses in Cyprus can benefit from an extensive network of double tax treaties, effectively minimizing double taxation, a significant boon for international commerce and investment.
Loss Carry-Forward Provisions
Cyprus provides flexible loss carry-forward policies, allowing businesses to offset current losses against future profits. This feature helps businesses maintain tax stability even in challenging financial times.
Capital Gains Exemptions for Businesses
Capital gains tax incentives in Cyprus extend to business activities, including the disposal of shares and property located outside Cyprus, providing tax-efficient options for businesses expanding globally.
Non-Domicile (Non-Dom) Tax Benefits
Cyprus offers unique tax advantages for international investors and expatriates with its Non-Dom program, which is designed to maximize returns while preserving wealth, making Cyprus one of the most appealing tax residency options.
Qualifying for Non-Dom Status
To gain Non-Dom status in Cyprus, one must not be domiciled in Cyprus but be a tax resident, spending either more than 183 days annually in the country or meeting the 60-day rule criteria. The 60-day rule provides flexibility, requiring that the individual does not spend more than 183 days in another country, has no tax residency elsewhere, spends at least 60 days in Cyprus, and has ties to Cyprus, such as property ownership or business activity.
Long-Term Non-Dom Tax Exemptions
Non-Dom residents enjoy up to 17 years of tax exemptions, supporting strategic, long-term financial planning.
Reduced Personal Income Tax Rates for Non-Doms
With its competitive income tax rates and multiple allowances, Cyprus offers Non-Dom residents a tax-efficient environment, bolstering their financial security and lifestyle.
0% Tax on Worldwide Dividends
Cyprus Non-Dom residents benefit from 0% tax on worldwide dividend income, enabling investors to maximize their returns from investments without local tax implications.
Interest Income Exempt from Additional Tax
Interest income for Non-Dom residents is also free from Cyprus’s Special Defense Contribution (SDC), letting savings and investment interest accumulate tax-free.
Overseas Capital Gains Exemption
Non-Doms in Cyprus are exempt from paying capital gains tax on assets sold outside of Cyprus. This provides an excellent opportunity for international investors to manage and grow their wealth efficiently, creating a prime environment for asset preservation and growth.
Inheritance Tax Freedom
Cyprus offers complete freedom from inheritance tax, allowing wealth to pass on to heirs without added tax implications. Secure your financial legacy with no taxes on wealth and inheritance, ensuring financial peace of mind for future generations.
In summary, Cyprus’s diverse and advantageous tax policies are drawing investors and businesses globally. With a combination of low corporate taxes, capital gains exemptions, and an accommodating environment for IP, Cyprus is positioning itself as an ideal place for both wealth preservation and business growth. Whether looking to secure long-term wealth, invest in property, or establish a company, Cyprus stands out as a top destination with a wealth of benefits.
*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.
Start a conversation with us today to find out how you can benefit from a relationship with Flexi Group.
Please get in contact with our Head of Business Development:
Mrs Daniella May / Head of Business Development
Tel.: + 357 7000 2 5555 / + 357 22 87 57 55
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