Legal System 

Until 1960 Cyprus was a colony of Great Britain. The legal system that was established was almost entirely based on the English legal system, and the legislation adopted the principles of Common Law and Indulgence.

The legal system in force, since the establishment of the Republic of Cyprus, maintains the influence of the English legal system. The laws applied by the Courts of the Republic of Cyprus are:

  • The Constitution of the Republic of Cyprus
  • The laws maintained in force on the basis of Article 188 of the Constitution
  • The principles of the common law and the principles of impartiality
  • The laws established by the House of Representatives.

Following the accession of the Republic of Cyprus to the European Union in 2004, the Constitution of the Republic was amended in order to give European law greater power.

 

Main Advantages of Taxation System

  • Cyprus’ current tax system is in full compliance with the EU and OECD.
  • Taxable profits of all Cypriot companies are taxed at the rate of 12.5% (however, effective corporate tax rate is NIL for most international transactions through Cyprus).
  • Extensive double tax treaty network leading to the avoidance of double taxation.
  • Gains from the disposal of securities are tax exempt.
  • Profits earned from a permanent establishment abroad are fully exempt from corporation tax (under certain conditions).
  • Dividend income received in Cyprus from a foreign corporation is wholly exempt from taxes in Cyprus (under certain conditions).
  • Interest income earned from trading activities, including interest which is closely related with trading activities, is subject to income tax at 12.5%.
  • No withholding tax on dividends and interest paid to non-residents of Cyprus. Also no withholding tax on royalties arising from sources outside Cyprus.
  • Group relief provisions for companies resident in Cyprus.
  • Capital gains are not subject to tax, except on sale of immovable property situated in Cyprus.

Personal Income Tax 

Tax %

Base (euro)

0 %

Up to 19 500

20%

19 501-28 000

25%

28 001-36 300

30%

36 301-60 000

35%

More than 60 001

  • Foreign pension income is taxed at the rate of 5%. An annual exemption of €3.420 is granted.

IMMOVABLE PROPERTY TAX

Immovable Property Tax has been abolished as of the 1st of January 2017.

 Until the end of 2016, the registered owner of the property, was liable to an annual Immovable Property Ownership tax calculated on the market value of the property as at 1st of January 1980 (paid by the 30th of September in the year). Immovable Property Tax was payable to the Inland Revenue Department of the Republic of Cyprus.

 

Value of Property (as of 1/1/1980)

Rate

Up to €40.000

0,6%

€ 40,001 – €120,000

0,8%

€120,001 – €170,000

0,9%

€170,001 – €300,000

1,1%

€300,001 – €500,000

1,3%

€500,000 - €800,000

1,5%

€800,001 – €3,000,000

1.7%

Over €3.000.000

1,9%

 

Capital Gains Tax

 When you sell a property in Cyprus, even though it may be your main residence, you are liable to pay Capital Gains Tax is charged on its disposal.

 Any Capital Gain is liable to be taxed at the rate of 20%. Subject to certain conditions, individuals may claim the following deductions:

  • Up to €85,430 if the disposal relates to a private residence.
  • Up to €25,629 if the disposal is made by a farmer and it relates to agricultural land.
  • Up to €17,086 on any other disposal.

These deductions are granted once in the lifetime of the individual, until fully exhausted and if an individual claims a combination of them, the maximum deduction granted cannot exceed €85,430.

Stamp Duty Fees

 In the case of a sales contract, you, as the purchaser, are liable for the payment of Stamp Duty at the following rates:

First €5,000

€0

€5,001 to €170,000

0.15%

over €170,001

0.20%

  • There is a maximum limit of stamp duty to be paid for one Contract of Sale/ agreement which is €20,000.

Example Contract of Sale value €300,000.

 

Property Value €300,000

First €5,000

€0

€5,001 to €170,000->€165,000

0.15%=€247.5

€170,001-300,000->€130,000

0.20%=€260

Total

€507,5

 

Estate Duty

Estate Duty has been abolished since 1 January 2000.