Cyprus has maintained its status as one of the most attractive tax residency destinations for decades, offering unique tax benefits, transparent business rules and a favorable climate for living and investing. This island state attracts more and more individuals and companies every year due to its flexible and stable tax system, which is adapted to the requirements of international law and modern economic realities. In this review we will look at the key aspects and advantages of tax residency in Cyprus, based on the latest data and statistics.

1. Flexible taxation system for individuals

One of the key factors that make Cyprus attractive to tax residents is the flexibility in taxation of individuals. Depending on their income structure, tax residents can minimize their tax liabilities through various exemptions and schemes. For individuals in Cyprus there is a progressive income tax scale, which ranges from 0% to 35%. At the same time, income up to €19,500 is exempt from taxation, which makes Cyprus one of the most advantageous places for individuals with relatively low incomes or for those who are looking for effective ways to optimize their tax liabilities.

2. Non-Dom Tax Residency Program

Cyprus is particularly popular for its Non-Dom (Non-Domiciled Status) program, which is designed for new tax residents. This program offers tax exemption on dividends, interest and capital gains received from foreign sources for 17 years. This makes Cyprus particularly attractive to high net worth individuals and owners of large multinational companies who wish to protect their assets and minimize tax liabilities in the long term.

The Non-Dom program has become one of the most sought after programs in Europe. According to statistics, since the introduction of this program, Cyprus has attracted more than 20,000 new residents, most of whom are highly qualified professionals and investors. This popularity is due to the absence of taxation of income from foreign dividends, interest and capital gains, which makes Cyprus an exceptional jurisdiction for international entrepreneurs.

3. No capital gains tax

Cyprus provides significant tax incentives for investors. For example, capital gains from the sale of assets other than real estate located in Cyprus are fully exempt from taxation. This is one of the most favorable conditions for those who actively invest in international markets, which makes Cyprus particularly attractive for traders, owners of shares and investors in cryptocurrencies.

4 No inheritance tax

Another key advantage of tax residency in Cyprus is the absence of inheritance tax. In most European countries, inheritance tax accounts for a significant portion of the value of inherited assets. However, in Cyprus, due to the absence of this tax, the transfer of assets between generations occurs at no additional cost, making the island attractive for family business planning and long-term investments.

5. Agreements on avoidance of double taxation

Cyprus has more than 65 double tax treaties with various countries around the world, including such key jurisdictions as the UK, Russia, USA, Canada and China. This allows Cypriot residents to minimize tax liabilities and avoid taxation in two countries at the same time.

Such agreements are becoming an important factor for international companies that do business in multiple jurisdictions. Through these treaties, Cypriot companies and individuals can maximize the benefits of their international operations by reducing taxation costs in other countries and avoiding double taxation.

6. 60-day tax residency program

Cyprus also offers a unique tax residency program based on 60 days. This means that an individual can become a tax resident of Cyprus if he/she spends only 60 days in the island during a calendar year, provided that several conditions are met (e.g. no tax residency in another country, having a business or employment in Cyprus). This program allows international entrepreneurs and investors to flexibly manage their tax status without being tied to one residence for a long period of time.

7. Tax on dividends and interest

For individuals who receive dividends or interest from foreign sources, Cyprus offers attractive tax incentives. Cyprus residents who qualify for the Non-Dom program are exempt from taxation of dividends and interest for 17 years. This makes Cyprus a popular destination for high net worth investors who derive a significant portion of their income from dividends.

8. Benefits for pensioners

Pensioners receiving pensions from abroad can also benefit from the Cypriot tax system. Pensions can be taxed at a reduced rate of 5% (on incomes over €3,420), making Cyprus one of the best places to retire with minimal tax liability. Such an offer attracts retirees from all over the world who are looking for a jurisdiction with a mild climate and a favorable tax system.

9. Stability and predictability of the tax system

Cyprus’ tax system has remained stable and predictable over the years, making it attractive for long-term business and investment planning. Cyprus is under the jurisdiction of European law and strictly adheres to international taxation standards such as BEPS (Base Erosion and Profit Shifting) and OECD recommendations. This ensures that residents can be assured of a predictable and stable tax regime.

10. Economic outlook and investment climate

The Cypriot economy is growing steadily. In 2023, the country’s GDP grew by 3.5%, which is above the Eurozone average. Cyprus is actively developing such industries as IT, finance, tourism and real estate. This creates additional opportunities for investment and business development on the island. In 2023, Cyprus attracted more than €2 billion in foreign direct investment, which confirms the confidence of international investors in the stability of the economy and the attractiveness of the business environment.

In addition to the already known tax benefits and advantages, Cyprus offers additional opportunities for tax residents that make it one of the most attractive jurisdictions in the world. In recent years, Cyprus has been actively innovating its economy, strengthening its international role and developing its infrastructure to attract new investors and businesses. Let’s take a look at how these changes are opening up even more opportunities for tax residents.

1. Digital economy and tax incentives for technology

Cyprus is positioning itself as a technology hub and is actively attracting IT companies and startups in the digital economy. The IP Box (intellectual property) program provides tax incentives to companies that work with developments, patents and innovative technologies. Through this regime, companies can obtain an 80% exemption on profits from the use of intellectual property rights, making Cyprus attractive to innovative start-ups and large technology corporations.

In addition, there is a tax exemption for residents of Cyprus on profits from the sale of cryptocurrencies. In recent years, Cyprus has become a popular destination for blockchain companies, and the authorities are actively working to create favorable conditions for crypto-investors.

2. International Trusts: Asset Protection

Cyprus also offers unique opportunities for asset protection through international trusts. Under Cypriot law, international trusts are exempt from capital gains taxes and the trust assets are protected from creditor claims. This makes Cyprus attractive for setting up trusts for the purpose of preserving and transferring assets between generations, and for protecting assets in the face of international financial and economic risks.

3. Regulation for e-residents and digital nomads

Cyprus is actively developing programs for digital nomads and e-residents, which becomes especially relevant in the context of globalization and the growth of remote work. The Cyprus Digital Nomad Visa program offers residency for remotely working professionals, allowing them to stay in Cyprus and enjoy all the tax benefits of the country, including exemption from taxation of foreign income.

Such conditions create a favorable environment for IT professionals, freelancers, as well as entrepreneurs who are looking for flexibility in doing business and tax optimization without being tied to one place of residence.

4. Favorable conditions for registration of funds and investment companies

Cyprus has become an attractive platform for the incorporation of investment funds and companies due to the favorable regime for such entities. Cyprus Investment Funds (AIFs) and Venture Capital Funds (VCs) enjoy favorable tax conditions and are regulated in accordance with European standards, which attracts foreign investors and asset managers. The successful registration of such funds in Cyprus allows them to operate in international markets with minimal tax obligations and a high degree of investor protection.

In recent years, Cyprus has become one of the leading centers for venture capital and hedge funds. In 2023, total assets managed by Cypriot funds exceeded €20 billion, demonstrating the confidence of international investors.

5. Program for highly qualified specialists

As part of its strategy to attract highly qualified professionals, Cyprus has introduced a tax incentive program for employees in key sectors of the economy such as finance, IT, medicine and science. Professionals who move to Cyprus to work can receive a 50% income tax exemption for the first 10 years if their annual income exceeds €100,000. This makes Cyprus attractive to expats and talent who want to work in a dynamic environment with minimal tax obligations.

6. Ease of administration and reporting

A simplified tax filing and reporting system is also available for tax residents of Cyprus. Thanks to the modern digital reporting system and the support of local tax advisors, tax obligations can be fulfilled in a short period of time, reducing the administrative burden on individuals and companies. This advantage is particularly important for entrepreneurs doing international business, as they can efficiently manage their tax affairs without unnecessary bureaucracy.

7. Geographical location and access to markets

One of the important advantages of Cyprus is its geographical location, which makes it a convenient hub for international operations. Cyprus is located at the crossroads of Europe, Asia and Africa, making it an ideal platform for companies operating on several continents. Thanks to agreements with the EU and extensive international ties, Cypriot companies and residents can easily enter new markets without facing high tax barriers.

Conclusion

Tax residency in Cyprus offers unique opportunities for individuals and companies, offering a flexible, stable and favorable tax system. The combination of low taxes, Non-Dom program, no capital gains and inheritance tax, and a wide network of international agreements makes Cyprus one of the most attractive jurisdictions in the world. If you would like to learn more about how to become a tax resident of Cyprus and take advantage of all its benefits, Almanova Law specialists will help you with every step of the process, providing expert advice and support at all levels.