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There are three main taxes imposed on individuals in Cyprus in addition to contributions paid to the General Social Insurance Scheme.

• Direct taxes, including income tax, defence contribution levy, housing taxes
• Indirect taxes (VAT, customs on good and services (
• Capital gains taxes (taxes on investments, deposits, etc.)
  

The Inland Revenue Department of Cyprus merged with the VAT Service recently in order to form the Tax Department, so any concerns or questions about direct taxation in Cyprus may be directed there:

Tax Department (Nicosia)
www.mof.gov.cy
Central registry e-mail: registry@mof.gov.cy
Phone: 22 601010

In order to be considered a Cypriot tax resident, you must have applied for a residency permit and be in Cyprus for over 183 days in the tax year in question. Once you have met this requirement, income tax will be applied to all income streams, whether they originate from inside or outside Cyprus.

Individuals who are no considered Cypriot tax residents are only taxed on the income they receive from a Cypriot source.

Individual Tax in Cyprus

Individual tax in Cyprus is made up primarily of the income tax and defence tax. If you have resided in Cyprus for over 183 days in the past tax year, which is counted as being from January 1 to December 31, you will be taxed on your total income as follows:

The defence tax applies only to unearned income such as dividends or bank interest, and ranges from 3% to 30% depending on the resident's source of income and personal circumstances.

Tax Rates in Cyprus

• Those earning less than 19,500 Euros annually in Cyprus pay no income tax.
• Those earning between 19,501 and 28,000 Euros in Cyprus pay a 20% tax rate.
• Those earning between 28,001 and 36,300 pay a 25% tax rate.
• Those earning between 36,301 and 60,000 pay a 30% tax rate.
• Those earning over 60,000 Euros pay a 35% tax rate.
• If you are earning a pension from services rendered abroad, you pay a 5% tax rate.

Deductions

Cyprus has special deductions for expats, as 20% of income from employment in Cyprus or 8,543 Euros  (whichever amount is lowest) is not subject to income tax for recent residents who are taking up employment in Cyprus for the first time. This deduction applies for the first three years of an expat as a Cypriot tax resident.

Reporting Taxes in Cyprus

The Cypriot tax year follows the calendar year as it starts on January 1 and ends on December 31. Employees must submit their Income Tax Returns by April 30th to Cyprus' Inland Revenue Department, while self-employed individuals who do not submit accounts can do so by June 30 instead.

Self-employed individuals who do submit accounts, as well as employers, must submit their Income Tax Returns by December 31.

Double Taxation Agreements with Cyprus

Cyprus has made double taxation agreements with several countries in order to avoid having expats pay income tax in two different nations. The full list of countries Cyprus has made such agreements with can be found on the Cypriot Tax Department's website, as can the specific terms of each agreement. Most of Europe and North America is included in the double taxation agreements.

VAT in Cyprus

There is a standard VAT (Value Added Tax) of 19% imposed on goods and services in Cyprus, with a few exceptions taxed at reduced rates of 5% and 9%.

Passenger transport, hotels and restaurants are subject to a reduced rate of 9%, while a range of diverse products and services including services provided by writers and artists, bottled water, fertilizers and animal food, live animals, newspapers, and books are now subject to a reduced VAT rate of 5%.

VAT Refund for Visitors to Cyprus

Visitors to Cyprus can receive a refund of the VAT they paid during their stay, provided they are not citizens of another member EU state, and not residents of Cyprus who simply spend a large portion of their year elsewhere. Staying in Cyprus for more than 183 days automatically disqualifies you from claiming a VAT refund.

To claim your VAT refund:

• Make purchases from shops that display tax-free shopping signs and ask for your tax-free document.
• Upon departing Cyprus, show purchases and passport to customs officials and get your tax-free document stamped.
• You are now eligible for VAT refund in the method of your choice, providing the total purchased from one store of chain is more than 171 Euros and less than 17,100 Euros.