Expat Taxes In Cyprus part 2 – Part one is here.
Benefits of Paying Tax in Cyprus
When it comes to paying taxes, there are a number of factors that need to be considered when deciding where to do so. For those looking for a tax-friendly destination, Cyprus is a great option. Here are seven benefits of paying tax in Cyprus.
Low Corporate Tax Rate
The corporate income tax in Cyprus is 12.50 percent, one of the lowest rates in Europe and much lower than other popular destinations for international companies such as Ireland (12.50 percent), Malta (17 percent), or Luxembourg (21.18 percent). That’s great news for those looking to start a business or expand an existing one.
The low tax rate also applies to individuals with a maximum income tax of 20 percent. In addition, Cyprus has a number of double taxation treaties with other countries, allowing companies to avoid paying taxes twice on the same income.
No Wealth or Inheritance Tax
Cyprus is one of the few countries in Europe that does not levy a wealth or inheritance tax. This is great news for those looking to pass on their assets to their heirs, as there will be no additional taxes levied on top of the sale price.
The only exception is real estate, which is subject to a transfer tax at the rate of either 20 percent or 12.50 percent, depending on how much you paid for it and other factors such as whether there is any mortgage on the property. There are no taxes on gifts given to family members, with only certain exceptions such as cash gifts over €12k per year being subject to taxation.
Under the Cyprus tax system, companies are not required to pay taxes on their profits. Instead, shareholders who receive dividends from these companies must declare them as income and pay taxes accordingly.
This is a major benefit for investors, who can take advantage of this policy by investing in Cypriot businesses that distribute their earnings back to shareholders without paying taxes first. This means that investors can take advantage of the low tax rate in Cyprus by investing in Cypriot businesses and receiving dividends from them while paying no income taxes themselves.
No Tax on Foreign Income
If you’re a resident of Cyprus, any money earned outside the country is not subject to taxation. This means you can earn money from overseas without paying taxes back home or having to declare it as income in Cyprus.
This is just one of the many reasons expatriates choose Cyprus over other destinations as their home base. The only exception is if you’re earning income from a Cyprus-based company, in which case you will need to declare it and pay taxes on it.
Ease of Doing Business
Cyprus is well known for its friendly business environment and ease of doing business. The country ranks fourth in the world when it comes to the overall friendliness of its tax system, with a score of 95 out of 100 on the World Bank’s “ease of doing business” index.
This is great news for companies looking to start or expand their operations abroad because it means there won’t be any bureaucratic hurdles standing in the way of growth.
Access to European Markets
Cyprus is a member of the European Union, which gives companies based in Cyprus access to the 500 million consumers within the EU’s single market. This provides a number of opportunities for businesses looking to expand their operations into new markets.
Additionally, Cyprus is also a member of the Eurozone and uses the Euro as its currency. This makes doing business in Cyprus and Cypriot businesses much easier for companies based in other Eurozone countries.
The benefits of paying tax in Cyprus are clear, and it’s no wonder that the country is such a popular destination for businesses and investors alike. If you’re looking for a place to do business with a low tax rate and a friendly environment, Cyprus should be at the top of your list.
Access to Professional Services
Cyprus has a highly developed financial sector, with many banks and lawyers offering their services at competitive prices. The country also offers a number of tax incentives for businesses looking to establish themselves in Cyprus or expand an existing business there.
This makes it easier than ever before for companies worldwide to do business in Cyprus and take advantage of the country’s low tax rates.
Deductible Expenses & Exemptions for Expats in Cyprus
If you are an expat living in Cyprus, there are a few things you should know about tax deductions and exemptions. In general, you can claim a deduction for expenses related to earning income. This includes items such as.
- The cost of equipment or tools used for work
- Car expenses (e.g., petrol, maintenance and repairs)
- Travel expenses (e.g., airfares, accommodation, and meals)
- Clothing (if it is worn for work), e.g., uniforms and protective clothes – stationery or books used for your job
- Education and training expenses that are closely connected to your current employment, e.g., tuition fees, textbooks, course materials
In addition to claiming deductions for work-related expenses, you may also be able to claim an exemption from income tax on certain allowances and benefits. For example:
- The first €19,500 of your annual salary is exempt from income tax in Cyprus
- Rental income is exempt from tax if you are a non-resident
- Interest income is exempt from tax if you are a non-resident
Social Security Payments Options in Cyprus
In Cyprus, social security payments are made to not working residents. A contribution from employers and employees funds the system. In order to be eligible for benefits, you must have worked in Cyprus for at least 12 months.
The amount of social security payments you receive depends on your income and family status. There are four types of payments:
- Benefits for children
- Retirement benefits (old age)
- Disability benefits (illness or accident)
- Survivor’s pension (after the death of your spouse).
Benefits for Children
The social security system in Cyprus provides benefits for children up to 18. The amount that you receive depends on your income and family status. Benefits are paid until the child reaches the age of 18 or completes their compulsory education, whichever comes first.
If you are receiving benefits for your child, you will be required to provide proof of their age and nationality (i.e., birth certificate).
You must submit an application for benefits within six months of the date that they would have been born or adopted into your family. If you do not submit an application within this time frame, the benefits may be denied. You can apply for benefits online or at your local social security office.
The social security system in Cyprus provides retirement benefits to residents who have reached the age of 65. The amount that you receive depends on your income and family status. Retirement benefits are paid until the recipient dies or reaches the age of 85, whichever comes first.
To be eligible for retirement benefits, you must have worked in Cyprus for at least 12 months. You must also have paid social security contributions for at least six of the last 12 months before you retire. Retirement benefits are usually paid in monthly installments, but they can be paid in a lump sum if the beneficiary prefers. You can apply for retirement benefits online or at your local social security office.
The social security system in Cyprus provides disability benefits to residents who are unable to work due to illness or accident. The amount that you receive depends on your income and family status. Disability benefits are paid until the recipient can return to work, dies, or reaches the age of 65 (whichever comes first).
To be eligible for disability benefits, you must have worked in Cyprus for at least 12 months. You must also have paid social security contributions for at least six of the last 12 months before you became disabled. Disability benefits are usually paid in monthly installments, but they can be paid in a lump sum if the beneficiary prefers.
You can apply for disability benefits online or at your local social security office. If you have a disability and need help with daily activities, then you may also be eligible for an additional payment called “disability allowance.” This is paid on top of any other benefits you receive from the government. You can apply for this benefit by contacting your local social security office.
The social security system in Cyprus provides benefits to the family of a deceased resident. The amount that you receive depends on your income and family status. Survivors’ pensions are paid until the recipient dies or reaches the age of 65 (whichever comes first).
To be eligible for survivor’s benefits, you must have worked in Cyprus for 12 months. You must also have paid social security contributions for at least six of the last 12 months before your spouse died. If you are receiving survivor’s benefits, you will be required to provide proof of your relationship to the deceased (e.g., marriage certificate). You can apply for survivor’s benefits online or at your local social security office.
Frequently Asked Questions about Expat Tax
Do I need to pay taxes as an expat in Cyprus?
If you are working and earning a salary, then yes. You will have to file your tax return even if you do not earn enough to incur any income tax from the government of Cyprus. The income tax is calculated as a percentage of your salary.
Do I have to pay taxes as a permanent resident?
If you earn more than €19,500 annually, then yes, your income will be taxed in Cyprus. If you earn less than this amount each year, then no – you do not need to pay any income tax. Permanent residents of Cyprus who receive other forms of income, such as rental income or dividends, are also liable to pay taxes on that income.
There are a number of tax considerations for expats living in Cyprus. That’s why it’s essential to understand the tax system before relocating to this part of the world. This will determine whether you must pay tax on worldwide income or just local income. For more information, refer to this platform to know what living in Cyprus entails.