Guide to individual taxes in Cyprus – Income tax

Are you thinking of moving to Cyprus? With relatively low income tax, no inheritance tax, and limited capital gains tax, this Mediterranean island does offer an attractive tax environment for income, investments, and pensions.

Before we dive into the specifics of respective taxes, what actually makes you tax resident?

It has been defined in the law that an individual who spends over 183 days in Cyprus is a tax resident of the Republic.

If an individual is tax resident in Cyprus, the person is taxed on income accruing or arising from sources both within and outside the Republic; but for those who are not tax residents in the Republic, they would only be taxed on income accruing or arising from sources within the Republic.

Income tax

As a resident of Cyprus, you are taxable on your worldwide income. Certain income, such as bank interest and dividends, can be taxed in the form of ‘defence contributions’. Imposition of Tax on Rental income is subject to both income tax and defence contributions. Depending on the type of income, there are also different tax exemptions.

As shown in the following table, your first €19,500 of income is tax free. Tax rates then start at 20% and rise progressively to 35% for income over €60,000.

The specifics with personal income tax rates and bands currently applicable to individuals:

Chargeable income for the tax year (EUR) Tax rate (%) Accumulated tax (EUR)
From To
0 19,500 0 0
19,501 28,000 20 1,700
28,001 36,300 25 3,775
36,301 60,000 30 10,885
60,001 and above  35

For foreign pension income, it receives special treatment in Cyprus, and you can choose how it is taxed each year:

  • At a flat rate of 5% on the excess of €3,420 (this sum being exempt), or
  • At the normal scale rates of income tax.

In addition, for tax years beginning 1 January 2020, all individuals who have gross income that falls under Article 5 of the Income Tax Law are obliged to file a tax return, regardless of whether the person received any notice for filing.

Previously, the obligation to make the filing was only for those earning annual gross income of more than €19,500. Note that gross income that falls under the specific Article 5 also includes dividends, interest and profits from share dealings (before any deductions, reliefs and credits) which may not be taxable under any tax or not taxable under income tax.

Besides, the Government is drafting its budgetary plan for 2021, which will introduce unilateral tax measures to address aggressive tax planning, including the introduction of withholding tax on dividend, interest, and royalty payments to countries in the EU ‘blacklist’ of non-cooperative jurisdictions on tax matters.

Note: Tax information has been summarised in this article. The current taxation laws and practices which are subject to change, and you are recommended to seek personalised advice.