Expat Taxes In Cyprus part 1 – that will be the topic of today’s article.
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Introduction
As an expat, it’s important to be aware of the tax laws in Cyprus. The good news is that Cyprus has a relatively simple tax system, and most expats will only need to pay taxes on their income and capital gains.
Income tax is levied at progressive rates, ranging from 0% to 35%. There are three tax bands in Cyprus, with thresholds at €19 500 and €28 000. Cyprus has double-taxation agreements with over 50 countries, including the UK and Russia. As such, you will only pay taxes once on any income received from these countries.
However, to claim this exemption, you must prove that your income is not taxable in Cyprus. You may also need to prove that your income is already taxed in the country of origin; a tax clearance certificate proving this can be obtained from the relevant tax authority.
You will only pay taxes on income received in Cyprus if you are considered a tax resident. To qualify as a permanent resident, you must spend more than 183 days in Cyprus or more than 280 days over four years. If you are not considered a tax resident, you will only pay taxes on income earned in Cyprus during the year it was received.
Well, if the entire concept sounds strange to your hearings, worry less. We’ve compiled this article to meet your requirements. Today, we are keen to expound on the expat taxes in Cyprus. That being said, you’ll understand the benefits of tax payment in Cyprus, the types of tax, and many others, to mention a few. Read further to have a glimpse of what we’re saying!
7 Interesting Things Expats Need to Know About Tax
As an expat in Cyprus, it’s important to understand the tax system and how it will affect you. In this article, we will outline some of the key points that you need to know. Cyprus has a relatively simple tax system, which is based on residency rather than income.
This means that you are taxed on your worldwide income, regardless of your resident. There are three main taxes in Cyprus: income tax, corporation tax, and value-added tax (VAT). Income tax is payable on income from employment and self-employment, rental income, pensions, and other sources of income. The rate of income tax varies depending on your income.
All employees, other than seafarers and those employed in the Diplomatic Corps or the United Nations, pay tax via a Pay as You Earn (PAYE) system on their total taxable income. Employers are required by law to deduct any income tax due from salaries and wages before they are paid out. The amount of tax paid depends on your income, which is calculated into monthly tax bands.
Any additional employment income you receive is taxed at a flat rate of 20 percent. In addition to this, contributions are also deducted from your payroll for social insurance and pension fund schemes. Without further ado, below are the seven interesting things expats need to know about tax.
- Expats need to be aware of their tax obligations in their new country of residence.
- Foreigners who live and work in the country are subject to taxes on their income earned from sources within that country.
- Expats should also be aware of their tax obligations in their country of origin, as many countries have a double taxation agreement with other countries.
- Expats who work in the country will likely be subject to income tax.
- Income tax is usually levied on employment, business profits, rental income, and capital gains.
- For employment income, tax is deducted at the source by the employer and paid to the authorities.
- Self-employed expats must pay income tax by submitting a tax return to the authorities.
Types of Taxes Available For Expats in Cyprus
The tax system in Cyprus is relatively straightforward, and there are a number of different taxes that expats may be liable for. The main types of tax are income tax, corporation tax, value-added tax (VAT), and capital gains tax.
Income tax is charged on wages and profits, corporation tax is levied on companies’ profits, VAT is a tax on the value of goods and services, and capital gains tax is payable on profits from the sale of assets. There are a number of exemptions and deductions that may be available, so it is important to speak to an accountant or tax specialist to find out exactly how much you will need to pay.
In general, income tax rates in Cyprus are lower than in many other countries, and the government is keen to attract foreign investment. However, it is important to note that tax laws can change at short notice, so it is always advisable to stay up-to-date with the latest information.
Income Tax
Income earned from employment in Cyprus is subject to income tax. The rate of taxation depends on the amount of taxable income and can be as high as 35 percent for those earning over €60,000 per year (paid through PAYE). Tax rates for other sources of income such as dividends or interest are lower.
Expats working in Cyprus are also allowed to claim a number of deductions, including for expenses such as travel and accommodation. The deadline for filing an income tax return in Cyprus is usually May 31st of the following year. However, taxpayers who have not been resident in Cyprus for the full tax year may be required to file their returns by December 31st instead.
Corporation Tax
Corporation tax is levied on all companies registered and operating in Cyprus, as well as those that have a permanent establishment in the country. The standard rate of corporate tax is 12.50 percent (reduced from 30 percent until 2018), which makes it one of the lowest rates in Europe. In addition, certain types of income may be exempt from tax, and there are a number of deductions that can reduce tax liability.
Companies must file their tax returns by March 31st of the following year. Payments are due in two installments: half is payable by June 15th, and the other half by November 15th. If you have established a company in Cyprus, it is essential to speak to an accountant or tax specialist about your obligations and any exemptions that may apply to your business.
Value-Added Tax (VAT)
Value-added tax is payable on income earned from the sale of goods and services. The standard rate for VAT in Cyprus is 19 percent, but some items are exempt or subject to a lower rate. Expats who set up a business may also reclaim any VAT they have paid as an input tax.
VAT returns must be filed every quarter, and the deadline for submission is usually the 25th of the month following the end of the quarter. Payments are also due quarterly and should be made by the last day of the month the return was filed.
Capital Gains Tax
Capital gains are subject to a special income tax rate, which is 30 percent for individuals and 12.50 percent for companies. Certain asset types may be exempt from the capital gains tax, so it is important to speak to an accountant or financial advisor about any exemptions that may apply.
In general, the sale of real estate is the most common source of capital gains. The deadline for filing a tax return in Cyprus is within six months of the sale.
As you can see, there are a number of different taxes that expats may be liable for when living in Cyprus. It is important to speak to an accountant or tax specialist to find out exactly how much you will need to pay and ensure that you are up-to-date with the latest information.
