The tax system in Cyprus is progressive. In other words, the higher your income, the higher the rate at which you will pay tax.
In 2009 the tax rates for an individual are 20% - 30%. There is a reduced rate and/or exemptions that are granted for certain forms of income.
The standard rate of Cyprus corporate tax for 2009 is 10%.
Residents are subject to defence contribution for passive income, e.g. rental, dividends etc. the rates are 3%-15%. Non residents are exempt from this tax.
Cyprus Income Tax for an Individual. An individual is liable for tax on his income as an employee and on income as a self-employed person. Tax will be payable on income earned in Cyprus and overseas but excepting a salary received overseas by an individual who meets the test of a "permanent resident" of Cyprus. A foreign resident who is employed in Cyprus pays tax only on income earned in Cyprus. To be considered a resident of Cyprus, residence of at least 183 days in Cyprus during any calendar tax year must be established or a life that is centered in Cyprus. An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance due from a salaried worker.
A self-employed individual is obligated to make advance payments on income tax that will be offset on filing an annual report. The advance payments are made in three equal payments. Certain payments are deductible from taxable income as detailed below.
Cyprus Individual income tax rates 2009
Tax % Tax Base (EUR)
0 up to 19,500
20 19,501 - 28,000
25 28,001 - 36,300
30 36,301 and over
Cyprus Corporate Tax
The basic tax rate is 10%.
The tax rate for semi-government bodies is 25%.
Shipping companies sailing under Cyprus flag pay zero tax on profits and dividend paid.
Cyprus Capital Gains
Capital Gains (for an individual). The profit on the sale of real estate or of shares in an unlisted company that owns real estate, is taxable at the rate of 20%. The tax must be paid on the difference between the cost, adjusted to the increase in the Index up until the date of sale, and the sale price. There is a basic exemption for an individual. The exemption is conditional on the class of the real estate. The amount of the lifetime exemption on the sale of a residential apartment is up to a maximum of EUR 85,430. (when living at least 5 years before sale).
Cyprus Capital Gains (for a corporation). The standard rate of tax for a corporation is 20%. For gains from immovable property, or from sale of shares in an unlisted company owning such assets.
Cyprus Reporting Dates and Payment:
The tax year in Cyprus is the year ending on December 31. Advance payments of income tax are made as specified below:
An Individual - An individual whose income is only from a wage is not obligated to file an annual return. The employer deducts tax from the employee and transfers it to the Tax Authority every month.
A self-employed individual must file an estimated return by the August 1 and three equal advance payments must be made according to the estimated return on August 1, September 30 and December 31. The return must be filed by April 30.
A Limited Company - The principles for the tax return and advance payments are similar to those for an individual. The tax payable must be paid by August 1, in the following tax year. Arrears in the Payment of Tax - Arrears entail annual interest of 5% for payment up to 6 months from the date determined for payment or 9% if the arrears are in excess of 6 months.
Cyprus Deduction of Tax at Source.
Taxation of Employee - The employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.
Cyprus Social Security
An employee: The employer's contribution is 6.3% of the salary. The employee's contribution is 6.3% of the salary. The maximum amount on which national insurance is payable is EUR 48,048 per year.
Self employed pay 11.6% on income. Income in excess of the maximum is exempt from national insurance.
Other deductions for payments to non residents Dividend - 0%. Royalties - 10% (5% for film royalties). Interest - 0%