About Cyprus

The Real Return on Investment

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Facts and Numbers

Top Reasons to Invest in Cyprus

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

Attractive & Transparent 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 countires
Access to all EU tax Directives
Dividend income exemption based on relaxed conditions

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

High Quality of Life

One of the best climates worldwide
Top 5 safest country in the world (Value Penguin 2015)
Top 4 best retirement destination globally (Knight Frank 2016)
Most blue flag beaches per capita in the EU (Eurostat)
Best island economy 2017/2018 lifestyle & human capital (fDi magazine)
STRONG BUSINESS SUPPORT SERVICES
Wide range of services make starting & running a business easy
700+ registered accounting firms including all major global firms
2,700+ registered lawyers and 160 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

Access to Talent

The youngest population & workforce in the EU
55% of the workforce has a tertiary degree
Businesses in Cyprus operate in English and 73% of Cypriots speak English
Visa-free access to European talent
Easy access to global talent

Positive Economic Outlook

Robust GDP growth
One of the fastest growing EU economies
Consecutive upgrades by credit rating agencies
Positive macroeconomic forecasts

Tax Advantages

Advantages of a Cyprus Company Incorporation

Profits of Cyprus companies who have their residence in Cyprus are subject to a corporate tax rate of 12.5%, one of the lowest tax rates within the European Union (EU).

Incorporation of Cyprus company is possible with 100% foreign ownership with a minimum one shareholder and one director both of which may be other corporations or natural persons.

No withholding tax on dividends, interest and royalties declared by companies to non-resident/domiciled shareholders.

Dividends paid to a Cyprus company are exempt from corporate tax.

Tax exemption on gains from the disposal of shares and other securities.

Beneficial IP regime which covers an 80% exemption on profits from the exploitation or licensing and gains on disposal of Intellectual property

Full capital gains tax exemption on the transfer or sale of shares in a company, except where the company owns immovable property in Cyprus.

Benefit from Double Tax Treaties with more than 55 countries.

Unilateral relief from tax in Cyprus on amounts of tax paid or withheld abroad.

There is no Wealth Tax or Inheritance Tax

Cyprus General Healthcare System

Introduction

The General Healthcare System (“GHS”) is introduced in Cyprus during 2019 with the objective to transform the existing public healthcare system. The Healthcare Insurance Organization’s vision is, through the implementation of the GHS, for every Cypriot citizen to enjoy lifelong, equal and unhindered access to high quality healthcare services.

The GHS Fund revenues will come from contributions, co-payments, personal contributions, donations and legacies, income from assets of the HIO and any other income accrued from the activities of the HIO. The main finance will come through compulsory contributions of employees, employers, self-employed persons, pensioners, persons earning other types of income and the government.

Dividends to other companies

Dividends paid to another company are not subject to SDC and GHS, but subject to the following exemtion.

Exemption: if the deemed distribution date comes first, then SDC and GHS contributions are payable and no refund is available for the CY resident companies.

Four year rule: Applicable to dividends paid between Cyprus tax resident companies – if four years have passed from the end of the year in which the profits arose, then the above exemption does not apply.

Contributions

The payment of the contributions for the first phase will start on 1 March 2019 (which will only cover outpatients) and for the full implementation on 1 March 2020 (which will cover both outpatients and inpatients).

Contributors

Employees – has the meaning given to the term Social Insurance Law
Employers – includes the Government of the Republic
Self-employed – has the meaning given to the term Social Insurance Law
Pensioners – shall be interpreted according to the term “pension” which means the retirement of any natural person coming from the sources specified in Article 5 of the Income Tax Law
Income-earners*
(*) Income-earners means the income of any natural person coming from the sources defined in Article 5 of the Income Tax Law (ITL), other than remuneration or pension, and includes dividends as defined in the Special Contribution for the Defense of the Republic (SDC).
The referral of the Law to Article 5 of the ICL means that the exemptions and exemptions of income granted for income tax purposes based on the other articles of the ITL do not apply for GHS contribution purposes.
In the case of income, for example, dividends are excluded from other legislation then they are not considered to fall under Article 5 of the Income Tax Law and therefore there is no obligation to pay a contribution to the GHS.

Dividends are determined in accordance with the SDC law, and therefore a contribution is paid to the GHS on the deemed dividends corresponding to the shareholders who are natural persons resident in the Republic. The company should deduct the contribution to these amounts. Shareholders are required to pay such dividends on the due date.

The GHS contribution on the one-off / gratuities paid to public and private employees and the benefits paid by Provident Funds, which fall under Article 5 of the ITL, is calculated on the amount earned for service after 1st March 2019.

Cyprus Benefits in Kind

The Tax Department (“TD”) has published an which explains the tax treatment of certain benefits offered by employers to employees and persons who hold or are deemed to hold an office. The Informative Guide provides clear guidelines as to the proper valuation of the Cyprus Benefits in Kind, for the purpose of consistency, clarity and uniformity, clearing any ambiguities.

In addition, the TD issued Circular 32 and Circular 37 both of which provide additional information on the documentation to be held and how the benefits in kind are calculated.

The taxation of benefits is provided in Article 5 of the Income Tax Law, according to which benefits from any office or employment, provided to an employee or to a member of his family either in cash or otherwise, are subject to tax.

The guide describes how the TD intends to apply the law as from 1 January 2019. Nevertheless, the subject provisions may be applied for previous years as well.

Cyprus VAT

An Overview of the Cyprus VAT System

Do you have a business in Cyprus and want a brief and easy to follow guide of the system? Do you have questions regarding VAT registration and VAT submission? Following is a comprehensive guide for Cyprus VAT rules. This article has been updated for 2022 Tax law. This article will apply to tax years ending 31 December 2022.

Welcome to our guide on the Cyprus Value Added Tax (VAT) system, regulations, rates, and the newly implemented introduced in 2022 by the Cyprus Tax Authorities.

As a leading provider of accounting, audit, tax, and advisory services in Cyprus, we aim to provide you with valuable insights into the Cyprus VAT landscape.

In this article, we will explore the key aspects of the Cyprus VAT system, including VAT rates, registration, compliance, the VAT Information Exchange System (VIES), and the newly introduced Tax For All system. Whether you’re a business owner or an individual seeking to understand the VAT environment in Cyprus, this article will serve as a valuable resource.

1. Understanding Cyprus VAT

1.1 What is VAT?
Value Added Tax (VAT) is a consumption tax and an essential component of the tax system in Cyprus, is levied on the supply of goods and services within the country, as well as on the acquisition of goods from the European Union and the importation of goods into Cyprus. Taxable individuals are responsible for charging VAT on their taxable supplies (output tax) and are also subject to VAT on goods or services they receive (input tax).It is an indirect tax that is ultimately borne by the final consumer. In Cyprus, VAT is a fundamental source of revenue for the government.
1.2 VAT in Cyprus – An Overview
Cyprus follows the , with its own specific regulations. The Cyprus VAT system requires businesses to register for VAT if their taxable turnover exceeds certain thresholds.
1.3 VAT Registration Thresholds
VAT registration is compulsory for businesses meeting either of the following criteria:
- Turnover exceeding EUR 15,600 during the preceding 12 months.
- Expected turnover exceeding EUR 15,600 within the next 30 days.
1.4 Voluntary VAT Registration
Even if a business’s turnover does not exceed the mandatory VAT registration threshold, it can still opt for voluntary registration with the. Voluntary registration can provide benefits, such as enabling businesses to reclaim input VAT on their expenses.

2. Cyprus VAT Rates and Exemptions

2.1 Standard VAT Rate
The standard VAT rate in Cyprus is currently set at 19%. This rate applies to most goods and services.
2.2 Reduced VAT Rates
Cyprus VAT Rates also includes the reduced VAT rates of 9% and 5%.
Reduced VAT Rate of 9%
This rate applies to accommodation, restaurant, and catering services, as well as certain local passenger transport services. It is also applicable to the supplies of goods and services provided by old people’s homes, subject to certain exemptions.
Reduced VAT Rate of 5%
This rate is applicable to various goods and services, including foodstuffs, pharmaceutical products, books, newspapers, and other specific items. Additionally, for individuals or eligible persons acquiring new buildings/houses as their primary and main residence, the reduced rate of 5% applies to the first 130 square meters of the buildable area and up to a total cost of €350.000. Provided, however, that the residence does not exceed 190 square meters of buildable area, and a total cost of €475.000. Any residence exceeding 190 square meters of buildable area and/or having a total cost of more than €475.000 will be subject to VAT at 19% on the total cost.
Individuals who have claimed the 5% VAT rate for their primary residence can apply for the reduced VAT for a new residence before a period of ten years has elapsed, provided they refund to the Tax Authorities the amount of VAT resulting from the application of the reduced rate instead of the standard rate (i.e., the difference between 19% and 5% = 14%) on the value of the residence for the remaining years of the ten years period (whereas before the change, they had to refund the total VAT benefit obtained).
Furthermore, the Cyprus VAT legislation states that the 5% reduced rate applies to the renovation, repair, and extension of used private residences that are considered old, with a minimum period of three years elapsed from their first use. The value of materials constituting over 50% of the service’s total value is excluded from the reduced rate.
2.3 VAT Exemptions and Zero-Rated Supplies
Certain goods and services are exempt from VAT in Cyprus, meaning no VAT is charged on their supply. Zero-rated supplies, on the other hand, are goods and services that are subject to VAT at a 0% rate.
Exports from Cyprus are zero-rated, meaning no VAT is charged on exports, and companies can recover any input VAT related to these transactions. Zero-rated treatment also extends to the supply, modification, repair, maintenance, chartering, and hiring of qualifying aircraft and qualifying vessels. Additionally, the supply of goods for the fueling and provisioning of qualifying vessels and aircraft, along with services meeting the client needs of qualifying vessels/aircraft, are also treated as zero-rated. A qualifying aircraft refers to an aircraft predominantly used by airlines operating for reward on international routes, while a qualifying vessel pertains to a vessel used for industrial purposes in navigation on the high seas.
Supplies of goods taking place outside the European Union fall outside the scope of Cyprus VAT.

3. VAT Registration in Cyprus

3.1 Compulsory VAT Registration
VAT registration is compulsory for businesses meeting either of the following criteria:
- Turnover exceeding EUR 15,600 during the preceding 12 months.
- Expected turnover exceeding EUR 15,600 within the next 30 days.
- Businesses with turnover below EUR 15,600 or with supplies falling outside the scope of VAT but eligible for claiming input VAT have the option to register voluntarily.
Registration is also obligatory for businesses that:
- Make acquisitions of goods from other EU member states exceeding EUR 10,251.61 during a calendar year.
- Engage in intra-Community supply of goods or services, or supplies of goods subject to reverse charge provisions. No registration threshold exists for intra-Community supplies.
Furthermore, businesses engaged in economic activities due to services received from abroad, where Cyprus VAT must be accounted for under reverse-charge provisions, have an obligation to register if their total turnover exceeds EUR 15,600 within any consecutive 12-month period.
Supplies of VAT-exempt goods and services and disposals of capital items are not considered when determining the annual turnover for registration purposes.
3.2 VAT Registration Process
The VAT registration process involves submitting an application to the Cyprus Tax Department, providing relevant information about the business, its activities, and its anticipated turnover. Upon successful registration, the business will receive a VAT number.
3.3 VAT Registration Obligations and Deadlines
Once registered for VAT, the taxable person in Cyprus has various obligations, including issuing VAT invoices, maintaining proper accounting records, and submitting periodic VAT returns.
3.4 VAT Invoicing Requirements
VAT invoices must include specific details, such as the supplier’s and recipient’s information, the VAT rate applied, and the total VAT amount. Invoices should be issued in a timely manner and retained for future reference.

4. The New Cyprus Tax and VAT System

4.1 Introducing Tax for All
Tax for All is a new digital platform introduced by the Cyprus Tax Department to streamline and simplify VAT reporting and compliance processes. The second stage is the implementation of the tax system.
4.2 Benefits of Tax for All
Tax For All offers several benefits, including simplified VAT reporting, faster processing times, reduced paperwork, and improved accuracy for a taxable person.
The Tax For All system enables businesses to submit their VAT and VIES reports electronically through a secure online portal. It automates data validation, reduces errors, and facilitates efficient communication with the tax authorities.

5. Cyprus VAT and International Trade

5.1 VAT on Imports
Imported goods into Cyprus are generally subject to VAT at the applicable rate. VAT is payable at the time of importation, and certain customs procedures and exemptions may apply.
5.2 VAT on Exports
Exports of goods and certain services from Cyprus to non-EU countries are generally zero-rated for VAT purposes. Businesses engaged in export activities can claim VAT refunds or apply for specific schemes, such as the VAT suspension scheme.
5.3 VAT Refunds for Non-EU Businesses
Non-EU businesses that incur VAT in Cyprus may be eligible to claim VAT refunds under certain conditions. Appropriate procedures and documentation must be followed to initiate the refund process.
5.4 VAT on Cross-Border Services
VAT treatment for cross-border services varies based on the nature of the services and the location of the recipient. Businesses need to assess the applicable rules and determine their VAT obligations accordingly.

Frequently Asked Questions

How much is VAT in Cyprus?

The standard VAT rate in Cyprus is 19%. However, there are also two reduced VAT rates: 9% for specific sectors like accommodation, restaurant and catering services, and certain local passenger transport services, and 5% for items like foodstuffs, pharmaceutical products, books, newspapers, and more.

Do I need to register for VAT in Cyprus?

If your business exceeds the VAT registration threshold or engages in certain types of transactions (e.g., acquisitions from other EU member states, intra-Community supplies), VAT registration is compulsory. You may also choose to voluntarily register for VAT if your turnover is below the threshold or your supplies are outside the scope of VAT but you want to claim input VAT.

What is the threshold for VAT registration in Cyprus?

The threshold for compulsory VAT registration in Cyprus is a turnover in excess of EUR 15,600 during the preceding 12 months or an expected turnover in excess of EUR 15,600 within the next 30 days.

How can I check if someone is VAT registered?

In Cyprus, you can verify the VAT registration status of a business by using the provided by the European Commission. VIES allows you to validate VAT number of registered businesses within the EU.

Capital Gains Tax

Capital Gains Tax (CGT) is imposed at the rate of 20% on gains from the disposal of immovable property situated in Cyprus or the disposal of share in companies that own Cyprus-situated immovable property when the disposal is not subject to income tax. CGT includes the sale, exchange, lease, gifting, abandoning use of right, granting of right to purchase, and any sums received upon cancellation of disposals.

CGT is also imposed on disposals of shares in companies that indirectly own immovable property situated in Cyprus where at least 50% of the market value of the said shares derives from Cyprus-situated immovable property. Shares listed on any recognized stock exchange are excluded from CGT. In the case of share disposals only that part of the gain relating to the immovable property situated in Cyprus is subject to CGT. The value of the immovable property will be its market value at the time the shares were disposed of.

Shares listed on any recognized stock exchange are excluded from these provisions.

CGT is payable within one month after the date of disposal.