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Calculation Methodology
How every number on Cyprus Tax Life is calculated. The effective rate model, the Cyprus Non-Dom mechanics, data sources, and what each figure does and does not include.
1. The Effective Rate Model
All effective tax rate comparisons on this site use the same standardized model: an entrepreneur who owns 100% of a company that earns a fixed amount of gross profit, and who extracts all of that profit as dividends.
The calculation follows two steps:
1. Corporate tax is applied to the gross profit at the company level.
2. Dividend or distribution tax is applied to the remaining net profit at the individual level.
Effective rate = (corporate tax + dividend tax) / gross profit x 100.
This model is chosen because it represents the most common structure used by location-independent entrepreneurs and business owners who are the primary audience of this site. It does not model salary income, retained earnings, or partial dividend distributions.
Example - Cyprus Non-Dom at €100,000 profit:
2. Cyprus Non-Dom Calculation in Detail
Cyprus applies the following taxes under the Non-Dom regime for a company owner:
Corporate tax (company level):
Special Defence Contribution (SDC): - Non-Dom residents: 0% on dividends, interest, and foreign rental income - Domiciled residents: 5% on dividends (from 2026), 30% on interest, 3% on rental income - Non-Dom status: automatic for those not domiciled in Cyprus (most foreign nationals qualify)
GHS (General Healthcare System) on dividends: - Rate: 2.65% on all dividend income received by Cyprus tax residents - Income cap: €180,000 total from all sources per year - Maximum annual GHS on dividends: approximately €4,770 (at €180,000 cap) - Applies to: all Cyprus tax residents, including Non-Doms - Does not apply to: foreign-source dividends if the recipient is not a Cyprus tax resident
The calculator on this site computes GHS with the income cap applied correctly: if salary and dividend income combined exceed €180,000, only the portion up to €180,000 is subject to GHS.
3. How Other Country Rates Are Calculated
For countries other than Cyprus, effective rates are taken from the most recent annual publications: - PwC Worldwide Tax Summaries 2026 (primary source) - EY Worldwide Corporate Tax Guide 2026 - KPMG Tax Rates Online 2026 - Deloitte International Tax Highlights 2026
We use the effective rate that these sources report for the dividend extraction model where available. Where they report only the nominal corporate and dividend rates, we calculate: effective rate = corporate rate + (1 - corporate rate) x dividend rate.
Important limitations: - Progressive rates: many countries have progressive dividend tax rates (e.g. Netherlands Box 2: 24.5% below €67,804, then 33%). We use a weighted or representative rate for the €100,000 income level, not a flat average. - State/local taxes: Germany's Gewerbesteuer, US state taxes, French local charges, and similar sub-national levies are included in the effective rate where they represent the typical average. - Social contributions: employer and employee social contributions on salary are NOT included in the effective rate model, which assumes full dividend extraction with no salary. The Cyprus calculator on this site does include social contributions on salary when a salary is specified. - Deductions and regimes: special regimes (Portugal IFICI, Italy flat tax for new residents, Spain Beckham Law) are noted but not used as the base rate, since they require eligibility conditions.
4. The Cyprus Tax Calculator Model
The interactive Cyprus tax calculator models a more complete real-world scenario than the comparison tables. It includes:
Revenue inputs:
Company-level calculation:
1. Employer social contributions computed on gross salary (8.8% SI + 2.0% Social Cohesion + 1.2% Redundancy + 0.5% Training + 2.9% GHS = 15.4% total)
2. Total salary cost = gross salary + employer contributions
3. Deductible business expenses (20% for home office, 100% for other categories)
4. Taxable profit = revenue - total salary cost - business expenses - accounting fees - personal invoice
5. Corporate tax = taxable profit x 15%
6. Net profit = taxable profit - corporate tax
Individual-level calculation:
7. Employee deductions from salary: 8.8% SI + 2.65% GHS = 11.45%
8. Net salary = gross salary x (1 - 11.45%)
9. Income tax on salary: 0% if salary ≤ €19,500 (standard threshold)
10. Dividend = net profit (all distributed)
11. GHS on dividends: 2.65% applied to dividend income up to remaining GHS cap (€180,000 - salary already subject to GHS)
12. Total take-home = net salary + net dividends
The effective rate shown in the calculator is: (total taxes at company + individual level) / annual revenue.
Rates used (2026):
5. Data Sources and Update Policy
Primary sources for all published tax rates:
The most recent major update was January 2026, covering the corporate tax rate change from 12.5% to 15% (effective January 1, 2026) and the SDC rate change on dividends from 17% to 5% for domiciled residents.
Update cycle: rates are reviewed at the start of each fiscal year and whenever the Cyprus Tax Department publishes amending legislation. The site is updated within 30 days of any published rate change.
If you identify an error or outdated figure, contact us at contact@cyprustaxlife.com.
6. What the Numbers Do Not Include
Our effective rate comparisons and calculators deliberately exclude certain cost categories to keep the model comparable and transparent:
Not included in effective rate tables:
Not included in country comparisons for other countries:
Why these exclusions matter: when comparing Cyprus to Germany or the UK, the effective rate difference is real but the total cost comparison is more nuanced. A German entrepreneur moving to Cyprus saves approximately €30,000/year in taxes on €100,000 profit, but faces costs such as relocation, establishing Cyprus residency, and ongoing accounting in Cyprus.
Our real savings pages show savings figures alongside notes on structural costs and treaty considerations, so readers have a complete picture.
Apply the methodology
All rates and figures are based on 2026 published legislation and professional tax guides. This methodology page documents our approach but does not constitute tax advice. Tax laws change and individual circumstances vary significantly.