Located in the Mediterranean basin, Cyprus is the natural gateway to Europe, the Middle East, Asia and Africa. Cyprus joined the EU in 2004 and adopted the Euro a few years later, in 2008.
Cyprus is a transparent, modern and reputable financial center. The island nation has more than four decades of experience in the field of serving international businesses who are looking to expand and develop further.
With very attractive tax incentives for corporates and generous tax concessions for individuals and families that relocate to Cyprus, there is little wonder why many decide on Cyprus as the ideal base for their regional and global business ventures.
We asked Costas Markides, Board Member and Head of the International Executive Services unit, KPMG Cyprus which advises High Net Worth individuals on personal taxation issues, your top 3 questions on Cyprus Taxation
1. What is the rate of Personal Income Tax and Company Income Tax in Cyprus
CM: Personal income tax rates in Cyprus
Net taxable income is subject to the following current rates:
Corporate tax for Cyprus tax resident companies is currently imposed at the rate of 12,5% on income derived from sources both within and outside Cyprus, after applicable deductions and exemptions. Dividends, capital gains or profits from the sale of shares and other securities constitute tax exempt income.
2. Please explain the Non-Domicile Status consideration and how this affects your tax liability in Cyprus
CM: The introduction of the Non-Domiciled Rule has created significant tax incentives for individuals – especially corporate executives and high-net-worth individuals – who consider taking up residency in Cyprus (while not domiciled there).
Generally, a person is considered to be a resident of Cyprus for tax purposes if that person is physically present in Cyprus for an aggregate period of 183 days or more during a calendar year.
An individual is considered to be domiciled in Cyprus for the purposes of SDC if:
- He/she has a domicile of origin in Cyprus (this is generally the domicile of the individual’s father at the time of birth (subject to certain exemptions)
- Or if he/she has been a tax resident in Cyprus for at least 17 out of the 20 tax years immediately prior to the tax year of assessment.
The effect of the introduction of the Non-Dom rule is essentially that an individual Cyprus tax resident who is a Non-Dom person will not be subject to SDC tax on:
- Rental income (otherwise subject to 2.25 of the rental income)
- Passive interest income (otherwise subject to 30% tax) and
- Dividends income (otherwise subject to 17% tax), irrespective of the fact that such income may be derived from sources in Cyprus and/or remitted to a Cypriot bank account or used or spent in Cyprus.
3. If you are thinking of investing in Cyprus real estate, are there any benefits to investing through setting up a company as opposed to investing as an individual?
CM: This depends on the specific personal circumstances and investment preferences of the individual investor.
Rental income received by an individual will be taxed at the gradual income tax rates as stated in Q1. Non-domiciled individuals are not liable to pay SDC tax on rental income.
Rental income received by a company will be taxed at the flat rate of 12.5% after deducting all expenses. On top of that, Tax resident companies are also liable to pay SDC tax on rental income at the effective rate of 2.25%.
Reduced VAT 5% for acquisition for Residential property
Individuals acquiring residential property in Cyprus, will be entitled to apply for the reduced VAT rate of 5% if used as its main and permanent place of residence (instead of the standard rate of 19% for new properties).
Companies are not entitled to claim the reduced VAT rate of 5%.
When an individual disposes of property, transfer fees will be applicable. In the instance where the shares of the Company, which is the owner of the residential property, are sold, transfer fees will not be applicable.
We advise that for Cyprus Citizenship purposes, both options are acceptable.
Information is accurate when published on October 11th 2018.
How Can One Invest in Cyprus Citizenship?
- Straightforward investment structure of €2.0 million + VAT for a single applicant + eligible dependents
- You can choose from a variety of investment routes, but all investment must include a permanent residence in Cyprus worth €500,000 ex. VAT.
- Parents of main applicant can also be added by making an additional investment in property of €500,000
- The investor must retain the investment for 3 years
- Low government fees for the filing of the application for Cyprus citizenship and a Cyprus passport
- No language proficiency tests
- Holders of a Cyprus passport enjoy visa-free travel to over 150 countries worldwide
There is no requirement to reside in Cyprus after obtaining the Cyprus citizenship. But for those who choose to relocate, there are many benefits too
– Security and safety for the whole family
– High quality public and private international schools
– High standard of living and healthcare
– High quality tourist facilities
– Fabulous weather year-round