Residents of Cyprus and foreigners residing there, carrying out professional activities, with special permits, are subject to the laws of the region. This also applies to the tax system. However, the land provides many benefits depending on the status. In order to avoid violating the laws and regulations of the state, it is important to carefully study all the requirements and comply with them. By adhering to all the rules, you avoid fines and can legally live in the country.
Cyprus Tax System
Residents of Cyprus are obliged to pay certain fees according to the law. Regardless of their status they pay income tax on worldwide income. If a person is not a tax resident of the region, then the tax is imposed only on income derived directly from activities in Cyprus. The system of charges on the island is very friendly and has many pros. Of all European countries here is the lowest interest rate – 12.5%.
Loyal tax policies for both citizens and migrants make the region popular for foreign investment. To become a taxpayer and experience all the benefits, it is necessary to obtain residence in Cyprus. Investors who buy and sell apartments can qualify for this status.
Tax Benefits for Individuals
The individual is obligated to pay both general and foreign taxes. The percentage rate depends on the amount of profit for the year and varies from 20 to 35%. However, if the annual profit was less than 19.5 thousand euros, the individual is exempt from paying the fee. Thus, the tax depends directly on the income and is calculated as follows:
- income of 19500 euros or less – 0%;
- income from 19501 to 28 thousand euros – 20%;
- income from 28001 to 36300 euros – 25%;
- from 36301 to 60 thousand euros – 30%;
- income over 60 thousand euros – 35%.
If a pensioner receives a pension exceeding the amount of 3420 euros per month, he or she is also subject to taxation. The interest rate is 5%.
The island does not impose inheritance tax. As a tax resident of Cyprus, a person is subject to capital gains tax, but only on income earned on the island. Cyprus tax optimisation allows to put income in order thanks to the loyal rates and legislation.
Tax Benefits for Businesses
Resident companies pay taxes on profits not only on the island, but also outside the island. The standard tax rate is 12.5%. Non-resident companies do not pay taxes. This is why many people say Cyprus tax heaven.
However, each type of business has additional nuances to be considered. For example, insurance companies also pay corporate tax. But there is an addition: if this tax is less than one and a half percent of the gross premium, the company must pay this difference as an additional tax on the business.
Cyprus VAT is 19%, but there are exceptions as well. Establishments that provide catering and accommodation services are taxed at a reduced rate of 9%. And businesses related to renovations and repairs are subject to even less taxation – 5%.
Tax Benefits for Investors
Cyprus tax benefits attract many investors. The fastest and easiest way to become a tax resident of the island is to participate in the residence permit for investment program. The minimum cost of this scheme is 300 thousand euros. Moreover, such a permit in five years makes it possible to obtain local citizenship. Most often, foreigners buy apartments. This purchase is already beginning to operate benefits. After all, VAT is 19%, but if the living space is purchased for their own use, the rate is only 5%.
As a specialist of Immigrant Invest Victoria Atanasova explains, when it comes to migration, the best solution is to contact the experts. Consulting agents will explain all the nuances of the scheme, taxation in each case and help at all stages. Specialists of a professional company also know all the pitfalls that may occur at the stage of preparing documents. They use an integrated approach, which saves time and nerves.
Cyprus is famous for the lowest rate of fees for companies that are residents. As for personal income, there is also a favorable situation. If an individual’s annual income is less than the threshold amount, income is not subject to tax. The island also offers many benefits for pensions and dividends.