Cyprus - a place to relocate
Location
With a strategic geographical location in the middle of three continents, namely Asia, Europe and Africa, Cyprus is the third largest island in the Mediterranean Sea and the natural gateway to the Middle East.
With a size that is big enough to be called cosmopolitan, at the same time, small enough to be regarded as the ideal place to raise a family. An island which enjoys more than 300 days of sunshine yearly, with mild winters and the largest number of blue flag beaches per coastal line in the world!
A sovereign European country, Cyprus is a member of the European Union, with a cultural heritage so rich that is lost in the centuries, yet an island that patiently awaits to be explored and re-discovered, offering an unparalleled level of quality of life which is second to none.
Business
With more than 30 years of experience as an international business centre that is supported by an abundance of highly-skilled professionals and complemented by a modern and investor friendly EU compliant tax system, a solid, impartial and credible legal system that is based on common law principles and a welcoming attitude towards expatriates, Cyprus is naturally the ideal hub for business and trade.
Two international airports (Larnaca, Paphos) with daily flights to all major destinations within and outside the EU and two multipurpose deep seaports (Limassol, Larnaca) connect the island to the rest of the world.
Even though the small and agile Cypriot economy has faced challenges as a result of the global economic and banking crisis, it is now on the path of steady and sustainable recovery and it is recording positive growth rates quarter after quarter. Dynamic sectors of the economy such as energy, professional services, tourism, shipping, construction and real estate are enhancing this trend.
Family
Cyprus has a multicultural population and enjoys a high standard of living and a very low crime rate. It is a great place to live in, embracing security and safety for the whole family.
Cyprus is home to many private schools offering a high level of education and their basic teaching language is English. There is also a number of reputable state institutions and private universities of higher education, which have secured endorsement of their diplomas by UK and USA educational establishments or cater for external degree programs and professional examinations.
Why to Invest in Cyprus
Positive economic outlook
• Robust GDP growth
• One of the fastest growing EU economies
• Consecutive upgrades by credit rating agencies
• Positive macroeconomic forecasts
Access to talent
• The youngest population & workforce in the EU
• 58% of the workforce has a tertiary degree
• Businesses in Cyprus operate in English and 76% of Cypriots speak English
• Booming private education sector with English taught programs
• Visa-free access to European talent
• Easy access to global talent
Access to markets
• Full access to European markets
• Access to 40+ EU trade agreements
• A member of the Eurozone since 2008
• Geostrategic position
• Proximity & easy access to major markets.
Excellent regulatory structure
• The legal system is closely aligned to the English common law legal system
• Frequently updated to meet investors’ changing needs
• Strong protection for investment & intellectual property (IP)
• Establishing a business is simple and fast.
Attractive tax regime
• One of the lowest corporate tax rates in the EU at 12,5%
• An attractive Double Tax Treaty network covering more than 60 countries
• Access to all EU Tax Directives
• Dividend income exemption based on relaxed conditions
• Capital gains tax exemption
• No withholding tax on outgoing dividend, interest or royalty payments
• Gains from trading in securities are tax exempt
• Notional interest deduction available for equity investment into Cypriot companies
• Foreign Exchange gains or losses are tax neutral
• An attractive personal tax regime for international professionals and non-domiciled individuals
• No succession or inheritance taxes
• No immovable property taxes
• A competitive Intellectual Property regime
• Tailor-made provisions for the investment funds industry
• Competitive Tonnage Tax for Shipping companies and an approved EU open registry
• Tax deductions for investment into startups.
Strong business support services
• Wide range of services make starting & running a business easy
• 780+ registered accounting firms including all major global firms
• 4,000+ registered lawyers and 180 law firms
• A range of serviced offices & co-working spaces
• High availability of modern and affordable office space in all cities.
Low cost of doing business
• Lower labour costs for technical and professional talents than in other major EU capitals
• Among the lowest office rental rates in Europe
• Highly affordable critical business support services
Quality of life
• One of the best climates worldwide
• Safest country in the world
• One of the best retirement destinations globally
• Most blue flag beaches per capita in the EU (Eurostat)
The Corporate Tax System at a Glance
• Taxation is based on Residency status
• 12,5% corporate tax on corporate trading profits
• Notional Interest Deduction (NID) available for new capital introduced
• Intangible Property (IP) Regime in line with OECD’s “nexus” principle
• Corporate tax on sale of securities: 100% exemption
• No withholding tax on outgoing payments (dividends-interest-royalties)
• Dividend income is exempt (subject to relaxed conditions)
• Applicability of all EU directives
• Foreign exchange differences are tax neutral
• Group relief availability (for 75% holdings)
• Tax exempt re-organisations
• Advanced tax ruling practice offers safety and predictability for investments
• Attractive and constantly expanding Double Tax Treaty network.
Tax Residency rules for Individuals
The 183 days rule
Cyprus has adopted a residency-based system of taxation, whereby physical presence in Cyprus exceeding 183 days in a tax year (1st January to 31st December) will constitute tax residency for individuals. Therefore, if an individual is physically present in Cyprus for more than 183 days in a tax year, he/she will be considered a tax resident of Cyprus in that tax year. Consequently, if the individual is physically present in Cyprus for less than 183 days in a tax year, he/she will be considered to be a non-Cyprus tax resident in that tax year.
The 60 days rule
As of 1st January 2017, the above tax residency rules have been amended to also provide that, an individual who does not stay in any other country, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in Cyprus in that tax year, if all of the following conditions are met:
(i) the individual stays in Cyprus for at least 60 days in the tax year;
(ii) exercises a business and/or is employed in Cyprus and/or holds an office with a Cyprus tax resident company at any time during the tax year;
(iii) maintains (by owning or leasing) a permanent home in Cyprus.
The law is further amended to clarify that an individual that cumulatively meets all the above conditions shall not be treated as a Cyprus tax resident in the tax year, if during that year the exercise of any kind of business in Cyprus and/or employment in Cyprus and/or holding of an office with a tax resident person in Cyprus, is terminated.
Days spent in Cyprus should be calculated as follows:
a) The day of departure from the Republic is deemed to be a day outside of the Republic;
b) The day of arrival in the Republic is deemed to be a day in the Republic;
c) The arrival in the Republic and the departure from the Republic in the same day is deemed to be a day in the Republic;
d) The departure from the Republic and the arrival in the Republic in the same day is deemed to be a day outside the Republic.
Non-Domicile rules for Individuals
According to the provisions of the Cyprus tax laws, an individual who is a tax resident of Cyprus under the provisions of the Income Tax Law (either under the 183 days rule or the 60 days rule) but is “non-domiciled” in the Republic of Cyprus, will be exempt from Special Defense Contribution (SDC).
As per the SDC law, dividends and interest income earned by individuals who are tax residents and domiciled in Cyprus, are subject to tax at the rate of 17%, regardless of the source of the income (i.e. from Cyprus or from abroad). Rental income is also subject to tax at the rate of 3% on 75% of the gross amount. Therefore, tax residents but non-domiciled individuals will enjoy dividend, interest and rental income free from SDC tax in Cyprus.
The new provisions define domicile in accordance with the rules of the Wills and Succession Law:
• A domicile of origin (i.e. the domicile received by an individual at birth); and,
• A domicile of choice (i.e. the domicile acquired by an individual by establishing a home with the intention of a permanent or indefinite stay).
A person who has a domicile of origin in Cyprus will be treated as “domiciled in Cyprus” for SCD purposes with the exception of:
• An individual who has obtained and maintained a domicile of choice outside Cyprus under the provisions of the Wills and Succession Law, provided that this individual was not a Cyprus tax resident for a period of at least 20 consecutive years prior to the tax year in question; or
• An individual who was not a Cyprus tax resident for a period of at least 20 consecutive years immediately prior to the entry into force of the introduced provisions (i.e. prior to 16/07/2015).
Irrespective of his/her domicile of origin, an individual who remains a tax resident of Cyprus for a period of at least 17 years out of the last 20 years prior to the tax year in question, shall be deemed as domiciled in Cyprus for SDC purposes.
Income Tax Rates
A Cyprus tax resident individual will be subject to income tax in Cyprus under the following personal income tax rates:
Concessions available to Expatriates
Exemptions regarding employment income
Individuals who were based overseas and who were not Cyprus tax-residents before the commencement of their employment in Cyprus, may be entitled to one (but not both simultaneously) of the following exemptions:
The 50% exemption rule
Remuneration from employment exercised in the Republic, by an individual who was not resident of the Republic for at least 15 consecutive years immediately before the commencement of his/her first employment in the Republic, will be eligible for an exemption from taxation of 50% of their income provided that:
• the individual’s first employment in the Republic commenced as from 1 January 2022 onwards and
• the remuneration from such employment exceeds €55.000 per annum.
The exemption is granted for 17 tax years, starting from the tax year of commencement of first employment in the Republic.
The 20% exemption rule
Remuneration from first employment in the Republic, which commenced after 26 July 2022, by an individual who was employed outside the Republic by a non-Cyprus resident employer for three consecutive years immediately before the commencement of his/her employment in the Republic, will be eligible for an exemption from taxation of 20% of their income or €8.550 (whichever is lower) from any employment which is exercised in Cyprus.
The exemption is granted for 7 tax years, starting from the tax year following the tax year of commencement of the first employment in the Republic.
Overseas Pensions
Overseas pensions are exempt from tax up to €3.420 and taxed at 5% thereafter. The taxpayer may opt to be taxed in the normal way, where this special mode of taxation of income results in a higher tax liability (this selection can be made from year to year).
Other Considerations
• 100% exemption on remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer
• 100% exemption on lump sum repayments from life insurance schemes or from approved provident funds
• No inheritance and gift taxes
• No wealth taxes
• No immovable property taxes
• Capital gains from the sale of immovable property situated outside Cyprus is exempt from tax
• Capital gains tax is only imposed on the sale of immovable property situated in Cyprus as well as on the sale of shares directly or indirectly held in companies (other than listed shares) in which the underlying asset is immovable property situated in Cyprus
• VAT can be reduced to 5% for the first 130m2 of residential property, provided that the purchaser uses the property as Primary Residence, the total purchase value does not exceed €475,000, and the total buildable area does not exceed 190 square meters
Transfer Fees Exemption:
• A 50% exemption from transfer fees under the Land and Surveys (Fees) Law will apply to all transfer applications
• According to existing law, in case where the property sale is subject to VAT, there is a 100% exemption from transfer fees.
Cyprus Citizenship
There are three legal ways in which a foreigner can get Cypriot citizenship:
• Be married to a Cypriot citizen for at least 3 years; or
• Have Cyprus roots; or
• Live in Cyprus for 7 years with a temporary residence permit or 5 years as a permanent resident.
The Cyprus Citizenship by Investment Program, the fourth option for obtaining a passport, was abolished on November 1, 2020.
Naturalization scheme based on years of residence
Cyprus citizenship can be obtained by foreigners who have completed a total of 7 years of legal residence in Cyprus before the application date. The applicant must have resided continuously in Cyprus through the last 1 year before applying. In cases of applicants who are children or parents of Cypriot citizens, the time required is 5 years rather than 7. The same 5 years period requirement applies to holders of permanent residency.
Cases for which 7 years of residence in the Republic are required: foreigners who hold a residence permit as students, visitors, self-employed, athletes, coaches, sports technicians, domestic helpers, nurses, employees of Cypriot or foreign employers or offshore companies and who reside in the Republic solely for the purpose of work, as well as their spouses, adult children or other dependents should accumulate a total stay in the Republic of at least 7 years (in the period of 7 years, the last 12 months before the submission of the application are included).
Cases for which 5 years of residence in the Republic are required: foreigners who hold any other status (apart from those mentioned above), should accumulate a total residence in the Republic of 5 years within the immediately preceding 7 years from the 12-month period that precedes the application.
On November 30th, 2023, an amendment to the Civil Registry Law was passed. The amendment allows highly skilled foreign workers to obtain Cypriot citizenship after residing in Cyprus for a shorter period, specifically 4 to 5 years (depending on their knowledge of the Greek language).
Permanent Residence Program
In line with the Cypriot government’s intention to increase foreign investment and to help its economic development, Regulation 6(2) of the Aliens and Immigration Regulations allows the Ministry of Interior to issue residence permits to applicants from non-European countries who intend to invest in the republic.
Benefits
• The application procedure is highly efficient, with a high approval rate if all criteria are satisfied.
• It is not necessary to reside in Cyprus, but a visit once every two years is required.
• Dependents can be enrolled in high-quality private schools offering English language courses.
• Residence applies to the main applicant’s spouse and children under 25 years.
• The whole process can be arranged without being present in the country, except for biometric capturing.
• Successful applicants are eligible to apply for Cypriot citizenship after five years of residence.
Investment category
The applicant must invest a minimum of €300,000 in one of the following categories:
i. Purchase up to two new immovable residential properties of a total market value of at least EUR 300,000 plus VAT, with the option to purchase from two different developers;
ii. Purchase up to two new or used immovable non-residential properties (offices, shops, hotels, or other developments) of a total market value of at least €300,000 plus VAT;
iii. Invest €300,000 in the share capital of a company registered and operating in Cyprus, which employs at least five people;
iv. Invest €300,000 in units of the Cyprus Investment Funds Association’s collective investments (AIF, AIFLNP, RAIF).
In addition to investing in one of the investment options described above, the investor must provide supporting evidence of a secured annual income of at least €50,000 deriving from abroad (an additional €15,000 is required for each dependent spouse and €10,000 for each minor child).
Companies of Foreign Interests
The Council of Ministers, approved the New Strategy for attracting companies to operate and/or expand their activities in Cyprus. The new Strategy, which came into force in 2022, abolishes and replaces the previous policy on the employment of personnel from third countries employed by companies of foreign interests.
According to the provisions of the New Strategy:
• Companies can freely employ any number of highly paid third-country nationals without going through a labour market check.
• Specialists are not limited to specific professions or skills.
• Companies commit to invest 30% of their total staff in Cypriots/EU citizens over a period of five years.
• The examination time of applications for residence and employment is set at one month.
Eligibility criteria
1. The majority of the company's shares are owned by third-country nationals (Non-EU);
2. If the majority of the company's shares are not owned by third-country nationals (i.e equal to or less than 50%) then the company is eligible if the foreign participation represents an amount of at least €200.000;
3. In both cases above, the ultimate beneficial owner (UBO) must deposit an amount of €200,000 in an account held by the company in a credit institution licensed by the Central Bank (payment institutions are not included). Alternatively, the company can submit evidence of an investment amounting to €200,000, for the purposes of operating its business in Cyprus (e.g. office purchase, office equipment purchase, etc.);
4. If more UBOs exist, then this amount can be deposited or invested by a single UBO or collectively;
5. Public companies registered on any recognised stock exchange;
6. Companies of international activities (formerly offshore), which operated before the change of regime, whose data are held by the Central Bank;
7. Cypriot shipping companies;
8. Cypriot high-tech/innovation companies;
9. Cypriot pharmaceutical companies or Cypriot companies active in the fields of biogenetics and biotechnology.
10. Companies of whom the majority of the total share capital is owned by persons who have acquired Cypriot citizenship by naturalization based on economic criteria, provided that they prove that the conditions under which they were naturalized continue to be met.
For the cases 3-8, the investment criterion is also applicable and the company's initial investment in Cyprus of at least €200,000, must be proven by presenting the appropriate certificates (e.g. bank statement at the time of deposit of the amount or proof of investment (purchase of office space and/or office equipment).
Criteria for Naturalization of Foreign Nationals
Foreign nationals are eligible for naturalization, provided that the following requirements are cumulatively met:
• Legal and continuous residency in the Republic for a period of 1-year prior to the application, with permissible absences not exceeding a total of 90 days within that year;
• During the 10 years immediately preceding the 1-year period mentioned above, legally resided in the Republic for a cumulative period of 7 years;
• Clean criminal record, no pending legal proceedings and not subject to any sanctions imposed by the EU and/or UN;
• Suitable accommodation in the Republic;
• Stable and regular financial resources to sustain oneself and dependents;
• Greek language proficiency equivalent to level B1;
• Sufficient knowledge of the Republic’s modern political and social landscape;
• Must have the intention to stay in the Republic.
Special Provisions
The Law reduces the minimum years of residency requirement for naturalization in the Republic for highly-skilled foreign nationals working for Companies of Foreign Interest. This is aimed at attracting international talent and promoting innovation. Specifically, highly-skilled foreign nationals working for foreign-interest companies may apply for naturalization provided that the following are met:
• Legal and continuous residency in the Republic for a period of 1 year prior to the application, with permissible absences not exceeding a total of 90 days within that year.
• During the 10 years immediately preceding the 1-year period referred to above, legally resided in the Republic for a cumulative period of 4 years. The 4 years rule applies to applicants that have a Greek language proficiency equivalent to level A2. The said period can be reduced to 3 years for applicants that have a Greek language proficiency equivalent to level B1. Absence periods not exceeding a total of 90 days annually are not counted as absence.
• Spouses and Civil Partners of the applicants can apply for naturalization under the same conditions.
• Minor children who reach the age of 18 during the evaluation of their parents’ application, can still apply as minors would and obtain the Republic’s citizenship.