Cyprus Taxation: Income Tax and Property Tax

Published on October 3, 2025 and written by Cyril Jarnias

Cyprus, a Mediterranean island at the crossroads of Europe, Asia, and Africa, is increasingly attracting expatriates thanks to its pleasant climate, quality of life, and advantageous tax regime. If you’re considering moving to Cyprus, it’s crucial to understand the local tax system to optimize your financial situation. In this article, we’ll explore Cypriot taxation for expatriates in detail, focusing on income tax, property tax, and other essential aspects.

The Mediterranean Tax Haven: Understanding the Cypriot Tax System

The Cypriot tax system is renowned as one of the most attractive in Europe, making it a prime destination for expatriates and international investors. Here’s an overview of the main taxes you’ll encounter as an expatriate in Cyprus:

Personal Income Tax Cyprus applies a progressive income tax system for individuals, with rates ranging from 0% to 35%. One of the most attractive features of this system is the exemption for the first €19,500 of annual income. Beyond this threshold, the rates apply as follows:

• From €19,501 to €28,000: 20%
• From €28,001 to €36,300: 25%
• From €36,301 to €60,000: 30%
• Above €60,000: 35%

This progressive tax structure allows expatriates to benefit from a relatively low effective tax rate, especially for those with incomes in the lower brackets.

Value Added Tax (VAT) The standard VAT rate in Cyprus is set at 19%, which is comparable to the European average. However, certain goods and services benefit from reduced rates:

• 9% for hotel accommodation and restaurant services
• 5% for certain food products, books, and transportation services

These reduced rates can help lower the cost of living for expatriates, particularly in tourism and leisure sectors.

Corporate Tax For expatriate entrepreneurs or investors, corporate tax in Cyprus is particularly attractive, with a fixed rate of 12.5%. This rate, one of the lowest in the European Union, makes Cyprus a preferred destination for business creation and investment.

Local Taxes Unlike many European countries, Cyprus does not impose significant local taxes. Municipalities collect fees for certain services like waste collection, but these amounts generally remain modest compared to the overall cost of living.

Optimize Your Situation: The Nuances of Income Tax in Cyprus

Income tax is often the primary concern for expatriates when moving to a new country. In Cyprus, the system presents several particularities that can prove very advantageous for tax residents.

Tax Resident Status To be considered a tax resident in Cyprus, you must spend at least 183 days per year in the country. However, Cyprus also offers an alternative option with the “60-day rule,” which allows obtaining tax resident status by spending only 60 days on the island, under specific conditions.

The “Non-Domiciled” Regime One of the most attractive aspects of the Cypriot tax system is the “non-domiciled” (non-dom) regime. This status, granted to new tax residents during their first 17 years of residence in Cyprus, offers considerable tax advantages:

• Complete tax exemption on dividends
• Complete tax exemption on interest
• 20% exemption (capped at €8,550) on employment income earned in Cyprus
• 50% exemption on employment income exceeding €100,000 per year

These exemptions make Cyprus particularly attractive for investors, senior executives, and international entrepreneurs.

Tax Treatment of Pensions For retired expatriates, Cyprus offers a choice between two tax options for foreign pensions:

• Taxation at a flat rate of 5% for amounts exceeding €3,420 per year
• Taxation according to the standard progressive scale

This flexibility allows retirees to optimize their tax situation based on their pension amount.

Investing in Real Estate: Property Tax in Cyprus

Real estate investment in Cyprus is a popular option among expatriates, whether for a primary residence or as a rental investment. Understanding real estate taxation is therefore essential for evaluating the profitability of your investments.

Abolition of Annual Property Tax Since 2017, Cyprus has abolished the annual property tax (Immovable Property Tax), representing a significant advantage for property owners. This decision has considerably reduced the costs of holding real estate on the island.

Transfer Fees When purchasing real estate in Cyprus, transfer fees are applicable. They are calculated according to a progressive scale:

• 3% for the value bracket up to €85,000
• 5% for the bracket from €85,001 to €170,000
• 8% above €170,000

However, there are reductions and exemptions, particularly for first-time buyers or purchases of new properties.

Capital Gains Tax on Real Estate Capital gains realized from the sale of real estate in Cyprus are subject to a 20% tax. However, several exemptions exist:

• Sale of primary residence (under certain conditions)
• Property transfer between family members
• Donations to charitable organizations

Additionally, indexing is applied to account for inflation, which can significantly reduce the taxable base.

Rental Income Rental income is subject to income tax according to the standard progressive scale. However, property owners can deduct certain expenses, such as loan interest, repairs, and depreciation, which can considerably reduce the taxable base.

File with Peace of Mind: Tax Obligations for Expatriates in Cyprus

Understanding your tax obligations as an expatriate in Cyprus is crucial to avoid any issues with local authorities and optimize your financial situation.

Annual Income Declaration All tax residents of Cyprus are required to submit an annual income declaration. The tax period corresponds to the calendar year (January 1 to December 31), and the declaration must be submitted by July 31 of the following year.

Declarations are primarily made online via the TAXISnet portal of the Cypriot tax administration. This system allows for simplified management of your tax obligations.

Tax Payment Income tax in Cyprus is generally withheld at source for employees. For self-employed individuals and those with other income sources, a system of provisional payments is in place:

• June 30: 35% of estimated tax
• August 31: 30% of estimated tax
• December 31: 35% of estimated tax

The final balance, if any, must be settled when submitting the annual declaration.

Specific Obligations for Non-Domiciled Individuals Residents benefiting from non-domiciled status must be particularly vigilant in their declarations. Although many incomes are exempt, they must still be declared to ensure transparency with tax authorities.

International Tax Treaties Cyprus has signed tax treaties with many countries to avoid double taxation. As an expatriate, it’s crucial to understand how these treaties apply to your situation, particularly if you receive income from foreign sources.

Maximize Your Benefits: Essential Tax Tips for Expatriates in Cyprus

To make the most of the Cypriot tax system as an expatriate, here are some strategic tips to keep in mind:

Plan Your Tax Residence The 60-day rule can be particularly advantageous for those who wish to benefit from Cypriot tax resident status while maintaining significant presence in other countries. Make sure to properly document your days of presence in Cyprus to meet the criteria.

Optimize Your Income Structure If you have the possibility to structure your income, consider the advantages of the non-domiciled status. For example, receiving part of your compensation as dividends rather than salary could significantly reduce your tax burden.

Invest Strategically in Real Estate Although the annual property tax has been abolished, carefully consider the structure of your real estate investments. Purchasing through a Cypriot company can offer additional tax benefits in some cases.

Consider Retirement in Cyprus For retirees, the option of a flat 5% rate on foreign pensions can be very advantageous. Compare this option with standard progressive taxation to determine the best strategy for your situation.

Use Tax Treaties If you have income from countries with tax treaties with Cyprus, make sure to understand and use the provisions of these treaties to avoid double taxation.

Plan Your Capital Gains If you’re considering selling assets generating significant capital gains, consider the timing of these sales. Tax residence in Cyprus could allow you to benefit from more advantageous taxation on these gains.

Stay Informed About Changes The Cypriot tax system regularly evolves to remain competitive. Stay updated on legislative changes that could affect your tax situation.

Conclusion: Cyprus, a Mediterranean Tax Haven for Savvy Expatriates

The Cypriot tax system offers numerous advantages to expatriates, making the island a prime destination for those seeking to optimize their financial situation while enjoying a Mediterranean lifestyle. The main strengths include:

• A progressive income tax with a generous exemption bracket
• Non-domiciled status offering substantial exemptions on certain types of income
• Absence of annual property tax
• Advantageous tax treatment of foreign pensions
• An extensive network of international tax treaties

However, to fully benefit from these advantages, it’s crucial to understand the nuances of the Cypriot tax system and carefully plan your situation. Each expatriate has a unique situation, and what’s optimal for one may not be for another.

Ultimately, Cyprus offers a favorable tax environment that, combined with its high quality of life and pleasant climate, makes it a top destination for expatriates. Whether you’re a mid-career professional, entrepreneur, investor, or retiree, tax optimization opportunities in Cyprus are numerous.