Cyprus Tax System: All Taxes Explained for 2026

How the Cyprus Tax System Works

Cyprus uses a residency-based tax system. Tax residents pay Cyprus tax on worldwide income; non-residents pay only on Cyprus-source income. The system combines low statutory rates with targeted exemptions - particularly for foreign investors and relocated professionals.

Residency-Based, Not Citizenship-Based

Cyprus taxes residents, not citizens. A Cypriot national living abroad owes no Cyprus tax on foreign income. A German national living in Cyprus becomes a Cyprus tax resident and benefits from Cyprus rates. This contrasts with the United States, which taxes citizens worldwide regardless of residence. Establishing tax residency in Cyprus is therefore the entry point for all tax benefits.

Who Is a Cyprus Tax Resident?

There are two routes to Cyprus tax residency. The standard 183-day rule: spend 183 or more days in Cyprus in the calendar year. The 60-day rule: spend at least 60 days in Cyprus, be tax resident in no other country, and not spend 183 or more days in any single other country in the same year.

• 183-day rule: spend 183+ days in Cyprus in the tax year (standard)
• 60-day rule: 60+ days in Cyprus + not tax resident elsewhere + not 183+ days in any other single country

Corporate Tax in Cyprus

Cyprus applies a flat 15% corporate tax rate on company profits - one of the lowest statutory rates in the EU. Profits are calculated under IFRS. Dividends paid from a subsidiary to a parent company are generally exempt under the participation exemption. Group relief allows losses to be offset within a group of Cyprus companies. See the full corporate tax guide for conditions and examples.

IP Box: 2.5% Effective Rate

The Cyprus IP Box regime applies an 80% exemption on net profit from qualifying intellectual property income, resulting in a 2.5% effective tax rate. This applies to royalties, licensing fees, and embedded IP income. See the IP Box guide for qualifying assets and conditions.

Personal Income Tax in Cyprus

Cyprus applies progressive income tax rates to employment and self-employment income. Following the December 2025 reform, the tax-free threshold was raised to EUR 22,000 (previously EUR 19,500). Full details in the personal income tax guide.

Income Tax Bands (2026)

• 0%: EUR 0 to EUR 22,000
• 20%: EUR 22,001 to EUR 32,000
• 25%: EUR 32,001 to EUR 42,000
• 30%: EUR 42,001 to EUR 72,000
• 35%: above EUR 72,000

50% Salary Exemption for New Residents

New residents who take up employment in Cyprus and earn EUR 55,000 or more per year qualify for a 50% exemption on their salary income. The exemption lasts 17 years from the start of Cyprus employment. This makes Cyprus particularly attractive for high-earning professionals relocating from higher-tax countries.

Non-Dom Status: The Key to 5% Effective Rates

Non-Domicile status is available to new Cyprus residents who were not domiciled in Cyprus during the 20 years prior to establishing residency. It lasts 17 years. The full conditions and application process are covered in the Non-Dom guide.

What Non-Dom Status Means in Practice

• Dividends and interest: exempt from Special Defence Contribution (SDC). Only 2.65% GHS applies.
• Effective rate on dividend income: approximately 5% (GHS capped at EUR 180,000 income).
• Salary income: normal income tax rates apply. Non-Dom does not exempt employment income.
• SDC for domiciled residents: 5% on dividends (reduced from 17% under the 2026 reform).

An investor receiving EUR 100,000 in dividends under Non-Dom status pays EUR 2,650 in GHS. A domiciled resident on the same income would pay EUR 5,000 SDC plus GHS. A German resident would pay approximately EUR 26,000 in withholding tax.

Capital Gains Tax in Cyprus

Cyprus does not tax capital gains except on immovable property located in Cyprus. Gains from shares, investment funds, crypto assets, and foreign property are fully exempt. On Cyprus immovable property, a 20% rate applies on the gain, with lifetime exemptions of EUR 17,086 (general) or EUR 85,430 (primary residence). Full rules in the capital gains tax guide.

Crypto Tax from 2026

A new 8% flat rate on crypto asset gains applies from 2026 under legislation passed in the 2026 reform package. This replaces the previous treatment of crypto as capital gains (0%). The crypto tax guide covers which assets are in scope, how gains are calculated, and transition rules.

VAT in Cyprus

Cyprus VAT runs at 19% standard rate, with a reduced rate of 9% on hospitality and accommodation services and 5% on essentials including food, medicines, and books. The registration threshold is EUR 15,600 annual turnover. Businesses below this threshold may register voluntarily. See the VAT guide for filing obligations and EU VAT rules.

Other Cyprus Taxes

GHS / GESY Healthcare Contribution

All Cyprus tax residents contribute 2.65% of income to the General Healthcare System (GHS/GESY). The contribution is capped at income of EUR 180,000 per year, making the maximum annual GHS payment EUR 4,770. GHS covers GP visits, specialist referrals, hospital care, and prescriptions at low co-payments.

Social Insurance

Employees contribute 8.8% of gross salary; employers contribute an additional 8.8%. The self-employed pay 16.6% on declared income. Social insurance contributions fund the state pension and sickness benefits. See the social insurance guide for caps, exemptions, and pensionable years.

Inheritance Tax

Cyprus abolished inheritance tax in 2000. There is no estate duty, gift tax, or wealth tax. Assets passed on death or gifted between individuals are not taxable in Cyprus. See the inheritance tax guide for cross-border considerations.

Stamp Duty

Stamp duty was abolished from 2026 as part of the reform package. Contracts and documents executed from 1 January 2026 onwards are no longer subject to stamp duty.

Property Transfer Fees

Real estate transfers are subject to property transfer fees calculated on the market value of the property at transfer. Rates vary by property value. Transfer fees apply on top of any capital gains tax on Cyprus immovable property.