Cyprus taxation for individuals

Cyprus taxation for individuals. Larnaca_sea_front2

 

Tax residents are taxed in Cyprus on their worldwide income resulting from any business or profession, salary, pension, rents or royalties and sale of business goodwill.

An individual is considered to be a tax resident person of Cyprus if he/she spends more than 183 days in Cyprus.

Non-tax-residents are taxed on business income resulting from permanent establishment in Cyprus, income from salaried services in Cyprus, pensions from Cyprus, rents and royalties from Cyprus and sale of business goodwill.

The personal tax rates are:

Income in Euro (€) RATE%
0    –   19,500                                0%

19,500 – 28,000                       20%

28,000 –  36,300                      25%

Over     36,300                            30%

Foreign pensions received by a resident may be taxed at his/her option separately at a flat rate of 5% for amounts over €3420.

It should be noted that income arising in Cyprus by non-resident professionals, artists and athletes is taxed at the flat rate of 10% on the gross amount of the remuneration received unless exempted under a Double Tax Treaty.

Any overseas tax withheld or paid abroad in respect of income from abroad which is taxed in Cyprus is allowed as a credit against the Cyprus tax resulting from the taxation of that same income.

INTEREST INCOME

Interest income derived by a tax resident individual is exempt from Income Tax unless it results from ordinary business activities or closely connected to them.

It is, however, taxed under Special Defence Contribution. This tax is withheld at source at the rate of 10% if paid by resident persons. If received from abroad this is taxed by a self assessment at the rate of 10%.

Interest derived by a non-tax-residents are exempt from Income Tax unless it results from ordinary business activities of a permanent establishment in Cyprus or closely connected to them and it is also exempt from Special Defence Contribution.

DIVIDEND INCOME

Dividend income derived by a tax resident is exempt from Income Tax and it is subject to Special Defence Contribution at the rate of 15%, which is again withheld at source from resident companies. Dividends received by an individual from a foreign company must be declared and taxed by self assessment at the rate of 15%. Distributions made from Mutual Funds to tax residents of Cyprus are taxed under Special Defence Contribution at the rate of 3%.

Non-tax-residents are exempt from both income tax and Special Defence Contribution.
IMMOVABLE PROPERTY RENTAL INCOME

It is taxed under Income Tax as part of the total income for both tax residents and non tax residents. However, any rent from a building for which there is a preservation order, is exempt from tax.  A deduction of 20% of gross rent is given instead of maintenance and other expenses. Any interest incurred is also allowed as an expense. Additionally, wear and tear allowance of 3% (4% for hotels and industrial buildings) is given on the cost of erection. Rents are also subject to Special Defence Contribution for residents only at 3% of gross rents reduced by 25%.

OTHER EXEMPTIONS

Profits arising from the disposal of shares and securities.
Profits arising from an overseas permanent establishment.
Salary from employment outside Cyprus by a non resident employer or by a permanent establishment abroad of a resident employer, provided this employment lasts for more than 90 days during the tax year.
20% of the salary (with maximum exemption of €8550 annually) from any employment exercised in Cyprus by an individual, who was not resident of Cyprus before the commencement of his employment for a period of 3 years from 1st January  following the year of commencement of the employment.

Capital Gains Tax is imposed on profits arising from the disposal of immovable property situated in Cyprus or from the disposal of shares in companies holding immovable property in Cyprus (excluding companies listed on a recognised Stock Exchange).

In the case of shares the profit is calculated only in relation to the value of the underlying immovable property.
The tax rate is 20%.  Allowable Deductions:  – The Cost of acquisition plus cost of additions or improvements indexed for the inflation and – All other expenses incurred for the production of the gain.

Immovable property tax is imposed yearly on the value as at 1.1.1980 of the property held in Cyprus as follows:

Value of property In Euro (€) Rate %

Up    to      170860              NIL

170860  –  427150           0.25

427150  –  854300           0.35

Over         854300              0.40

This post DOES NOT constitute any advice but is general information available at the time.  It is your own responsibility to check out your particular circumstances regarding taxation in Cyprus or any othere country.