If you’ve made it this far, you’re in luck. In today’s blog you’ll learn all you need to know about Cyprus and whether it’s right for you to open a business in this country.
In an increasingly globalized world, international taxation plays a fundamental role in shaping your business strategy. The ability to leverage favorable tax regimes can yield significant advantages when establishing a business and contribute to its growth and profitability.
Cyprus, with a highly attractive tax system, has become a popular destination for entrepreneurs and international companies looking to reduce their tax burden. Are you considering open a company in Cyprus? Perhaps changing your tax residence in Cyprus? Don’t miss this article.
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Benefits of Register a company in Cyprus
Before delving into the details of how to form a company in Cyprus, it is important to understand the advantages Cyprus has to offer. Some of the main advantages are:
- Access to the European Union: The island has been a member of the European Union since 2004, providing businesses registered in the country access to a market of over 500 million people.
- Tax Benefits:The Mediterranean paradise has a competitive and attractive tax system for companies. The corporate tax rate in Cyprus is 12.5% and with double taxation treaties with many countries and tax exemptions for investments and dividends, companies can enjoy significant tax advantages.
- Political and Economic Stability: Cyprus offers a stable political and economic environment, providing investors and entrepreneurs with security and confidence.
Now that we’ve highlighted the benefits of register a company in Cyprus, let’s delve into key aspects related to residence, taxes, and costs in this country.
Why is Cyprus a strategic point for establishing your company?
Chipre is an island located in the Mediterranean Sea, at the crossroads of Europe, Asia, and Africa. Its strategic position has exerted a significant influence on its history, economy, and political situation, and the Cypriots have been able to capitalize on these circumstances in their favor.
They have understood that by establishing favorable fiscal policies throughout the island, it becomes a highly attractive destination.
In fact, Cyprus has become a hub for international entrepreneurs. More and more companies, both large corporations and owners of small and medium-sized businesses, are attracted by the tax advantages offered by the island. All of this translates into rising prices and an improvement in the quality of life in Cyprus.
Residency in Cyprus
If you are considering establishing yourself in the island, obtaining the tax residency in Cyprus will be an important step. Tax residency in Cyprus offers a range of advantages, such as access to the social security system and the freedom to travel within the European Union. Many individuals decide to establish their company in Cyprus to obtain residency in the country. However, before obtaining residency in Cyprus, you must meet certain requirements, which include:
Requirements for Obtaining Residency in Cyprus
- Minimum stay required: To be eligible for residency in Cyprus, you must spend at least 183 days a year in the country.
- Required documentation: You will need to submit certain documents, such as a passport, a certificate of no criminal record, and proof of sufficient income to cover your expenses in Cyprus.
- Application process: The residency application process in Cyprus involves completing forms, providing the required documentation, and paying the corresponding fees.
- Obtaining residency in Cyprus offers a series of advantages: it provides you with the opportunity to enjoy the benefits of being a resident in a European Union member country, as well as the tax benefits that Cyprus offers.
The 60-Day Rule
One of the most popular ways to obtain the residency in Cyprus is through the non-dom status. This regime allows non-European Union individuals to establish their tax residency in Cyprus and benefit from a favorable tax regime.
According to the 60-day rule, non-dom residents of Cyprus are only subject to taxes in the country on their income generated in Cyprus during a 60-day period.
Yes, you heard right; you only need 60 days to start becoming a tax resident on Cyprus. This contrasts with the 183 days required by many other jurisdictions, making it an extremely attractive option for digital nomads or entrepreneurs who wish to reside in other countries for the rest of the year (as long as they do not exceed the time limit set in those countries).
Residence for European Citizens with the Yellow Slip
If you are a citizen of a European Union country, you have the right to reside in Cyprus without the need for a specific visa or residence permit. However, if you wish to establish your permanent residence in Cyprus, it is advisable to obtain the yellow slip.
The yellow slip, also known as the Certificate of Registration of Residence, is a document that certifies your right to reside in Cyprus as a European citizen. To obtain it, you should follow these steps:
- Registering Your Presence: You must register with the immigration authority of Cyprus within the first four months of your arrival in the country. The registration process involves providing documents such as your passport, proof of income, and medical insurance.
- Demonstrating Financial Means: As part of the registration process, you may need to demonstrate that you have sufficient financial means to support yourself in Cyprus without becoming a burden on the country’s social assistance system. For example, here you may need to register a company in Cyprus or work as an employee.
- Establishing an Address in Cyprus: You will need to provide an address in Cyprus where you can be contacted. This can be a residential or commercial address.
- Obtaining Non-Dom Status in Cyprus: This will allow you to not only enjoy the 60-day rule in Cyprus, but also the tax benefits that can reduce your taxes by up to 75% compared to other countries like Spain.
Once you have completed these steps, you will receive the yellow slip, which will allow you to reside and work in Cyprus legally.
Cyprus Tax System
The tax system in Cyprus is an attractive factor for businesses and individuals looking to establish themselves in the country. Cyprus has designed its tax system to promote foreign investment and encourage business development.
The tax system in Cyprus is based on basic principles of taxation. The country has double taxation treaties with over 60 countries, which prevents double taxation for residents and businesses engaged in international business.
Types of Taxes in Cyprus
- Corporate tax Cyprus: Cyprus applies a corporate tax rate of 12.5%, one of the lowest in Europe. This makes Cyprus attractive to companies seeking to minimize their tax burden. Some intellectual property companies may qualify for the IP box regime where they can pay as low as 2.5% in corporate tax.
- Income tax Cyprus: Personal income tax in Cyprus is applied progressively, with rates varying based on income. Tax rates range from 0% to 35%. It’s important to note that Cyprus offers an excellent tax advantage – the first €19,500 is tax-free.
- Value Added Tax (VAT) Cyprus: VAT in Cyprus is applied to most goods and services at a standard rate of 19%. However, there are certain exemptions and reduced VAT rates for specific categories of goods and services.
In addition to these taxes, Cyprus also has other taxes and fees, including capital gains tax, property taxes, and municipal taxes.
Taxes on Trading and Investments in Cyprus
- Capital gains tax in Cyprus: If you are an individual and decide to keep your assets in Cyprus, you won’t have to worry about additional taxes. It’s like enjoying a sunny day on a Cypriot beach without the dark clouds of taxes bothering you. However, if you become an active trader, tax authorities will consider your activity as professional, and you will have to deal with tax payments.
- Dividends distribution in Cyprus: It doesn’t matter if your income is €1,000 or €10 million; the tax rate won’t increase. Moreover, you can distribute dividends from your company to your bank account, paying only 2.65% on the first €180,000. This makes the total tax rate in Cyprus only 15%. In my view, paying that rate and living in Europe is a total bargain.
And that’s not all; if you earn more than €180,000, you won’t have to worry about more money on your dividends. The maximum you will pay when distributing dividends in Cyprus annually is around €4.500.
Income Tax Cyprus
| Taxable income | TAX RATE | tax amount | Tax accumulated |
| 0 – 19.500€ | 0% | 0€ | 0€ |
| 19.501€ – 28.000€ | 20% | 1700€ | 1700€ |
| 28.001€ – 36.300€ | 25% | 2075€ | 3775€ |
| 36.301€ – 60.000€ | 30% | 7110€ | 10885€ |
| > 60.000€ | 35% | * | * |
The law stipulates that tax residents will remit personal income tax rates based on their earnings. If your annual income is up to €19,500, your tax rate is 0%. For earnings up to €28,000, you’ll pay an income tax rate of 20%, and up to €36,300, it’s 25%.
As your earnings increase, tax rates will adjust accordingly. For example, those earning around €60,000 will pay a 30% tax rate, and for those exceeding €60,000, it’s 35%. But that’s not all, because income from dividends, interest, foreign-earned salaries, and capital gains are exempt from income tax.
Tax concessions in Cyprus
There are available tax concessions in Cyprus that can provide even more tax benefits. If you were not a tax resident in Cyprus before starting your employment, you can still obtain concessions! You can enjoy a 20% exemption on income tax or €8,550 for five years.
And that’s not all, if you earn more than €100,000 during ten years from the start of your employment, you could get a 50% exemption. Even foreign pensions can enjoy a 5% tax exemption if they exceed €3,420, although if you reach a higher tax liability, you may opt for regular taxation.
National Health Service in Cyprus
Cyprus has implemented the National Health System (GESY), a government-funded universal healthcare system. It provides outpatient services, and as of June 2020, inpatient services will also be fully implemented.
This way, all Cypriots can access equitable healthcare services, including specialists and general practitioners.
Contributions to GESY are calculated based on your income, and the rate varies depending on your employment status. Both employees and employers make specific contributions, while self-employed individuals and pensioners also have their own contribution rates. Additionally, there is a fixed state fund that makes an additional contribution.
Non Domicile in Cyprus
The Non-Dom Program in Cyprus is an attractive opportunity for entrepreneurs and wealthy individuals looking to benefit from significant tax advantages and a favorable environment in the country. This program offers tax exemptions on dividends, interest, and foreign-source income.
It also allows you to become a tax resident with a minimum presence requirement of 60 days per year. In this article, we will explore the benefits and requirements of Cyprus’s Non-Dom Program, as well as the details of how to meet the specifications for becoming a non-domiciled resident.
The Numerous Benefits of the Non-Dom Program in Cyprus
Being a non-domiciled in Cyprus offers several compelling advantages for individuals and companies considering international offshoring and tax planning. This program provides significant tax advantages that can lead to substantial savings. Let’s explore some of the main advantages:
- No taxes on dividends: Imagine earning dividends from both domestic and foreign investments and being entirely exempt from taxes. As mentioned earlier, you will only pay 2.65% if you are a resident in Cyprus to contribute to the national healthcare system. If your company in Cyprus is offshore, you will be tax-free.
- No taxes on interest: Both individuals and companies registered in Cyprus enjoy a complete exemption from income tax on interest. Whether your income comes from foreign or domestic sources, you won’t have to pay taxes if you are not a tax resident in Cyprus.
- Small minimum presence requirement: As mentioned earlier, this program opens doors for investors seeking maximum flexibility and only requires 60 days of presence, either in a single period or through multiple visits.
- Long-term security program: The Cyprus Non-Dom program guarantees tax benefits for 17 years. This provides security and facilitates long-term planning and investments.
- Access to healthcare and social security: As a non-domiciled member in Cyprus, you can access the European Union’s healthcare and social security systems. This provides peace of mind and additional benefits for those who choose Cyprus as their tax home.
- No remittance-based taxes: Would you like to retain, distribute, or move international capital gains freely? The Cyprus Non-Dom program waives all taxes on a remittance basis.
- Avoidance of salary taxes: If you are Non-Dom and your income is below €19,500, this regime completely exempts you from income taxes.
In summary, Cyprus’s Non-Dom program offers a range of compelling tax benefits, making it an attractive option for individuals and businesses looking to optimize their tax positions while enjoying the benefits of residing in this beautiful Mediterranean island.
How to apply for non-domiciled status in Cyprus?
Now that you are aware of all these tax and social advantages, why not consider moving to Cyprus? To apply for non-domicile status, you should complete the following process:
- As a European Union citizen, you must first obtain a registration certificate, known as the “yellow slip,” which allows you to reside and work in Cyprus. Remember that all non-Cypriot passport holders must obtain this registration certificate from the immigration department before proceeding to the tax authority to obtain residency.
- The next step is to register with the tax authority to receive an identification number. To do this, you may need to spend at least 183 days in Cyprus and submit all the relevant tax declaration forms. After completing your 183-day stay, you will be eligible to obtain a tax residency certificate. This certificate will be required by entities and financial authorities in other countries. Once you have successfully registered as a tax resident in Cyprus, you can obtain non-domicile status.
- If you wish to qualify as non-domiciled in Cyprus, you can submit an application to the Ministry of Interior to obtain a registration certificate. If you have already relocated, you can request the application from your tax advisor or choose a pre-prepared immigration package for non-domiciled individuals. This status can be applied for by employees, self-employed individuals, retirees, or visitors in Cyprus. As a European Union citizen, you can also make a formal application for family members, providing the required documents for each of them.
- Among the necessary documents to obtain tax residency in Cyprus with non-domicile status are a rental agreement or property certificate, a copy of your passport, tax registration forms, the immigration yellow slip, proof of social insurance payment, a source of income, and evidence of not being born in Cyprus.
If you would like us to handle this service for you, please let us know HERE
How to Set Up a Company in Cyprus
We will show you how to register a company in Cyprus intelligently. Ultimately, if you want to pay less taxes in Cyprus, you need to demonstrate a source of income. This is why many entrepreneurs choose to register a company to enjoy non-domicile status in Cyprus.
Planning Stage:
Step 1: Find a service provider familiar with Cyprus dynamics who can guide you through the process. We work with this company.
Step 2: Choose an attractive name for your company, and you will need to design your company’s structure: Directors, secretary, registered address…
Step 3: Once you have found the name for your company in Cyprus, the Department of Registrar of Companies and Official Receiver (DR-COR) will ensure the name for a limited time. Once you have the name of your company in Cyprus, we move to the incorporation stage.
Incorporation Stage:
Step 4: It’s time to prepare all the necessary documents for incorporating your company in Cyprus. Imagine you are signing the deed of incorporation and the company’s articles of association. This document will give your business a name and objectives. It will also include the address of the subscribers, share capital, and other important details.
Step 5: The submission moment – Once your documents are ready, it’s time to submit them. Here, you will need to submit signed forms and other required documents. But don’t forget the affidavit signed by a Cypriot lawyer.
Step 6: Approved! After going through the review and approval process by DR-COR, your company will be officially incorporated. It’s time to celebrate and receive the final documents that will certify you as a new member of the Cypriot business world. Get ready to receive the signed deed of incorporation and articles, director and shareholder certificates, registered office certificate, and the certificate of incorporation!
Post-Incorporation Stage:
Step 7: Now that your company has come to life, it’s time to open a bank account. With a company in Cyprus, you can choose a bank in any country you desire, whether for your local or international operations.
Step 8: Nobody can escape taxes, right? It’s vital to obtain your company’s Tax Identification Number (TIN) in Cyprus and register for VAT if your turnover will reach or exceed 15,600 euros annually. Nevertheless, paying taxes in Cyprus is minimal and will help contribute to the development of this beautiful nation so that many future generations can enjoy these benefits.
Step 9: If you plan to hire employees in your Cypriot company, make sure to register as an employer with the Ministry of Labour, Welfare, and Social Insurance. You’ll receive a unique employer identification number and be ready to expand your team.
Again, I remind you that you can OPEN YOUR COMPANY IN CYPRUS with this service provider HERE.
CONCLUSION
In conclusion, establishing a company in Cyprus offers numerous tax advantages and business opportunities. With a low corporate tax rate and double taxation treaties in place, businesses can minimize their tax burden and maximize their profits. Additionally, the Non-Dom regime provides significant benefits for non-domiciled residents, allowing them to take advantage of tax exemptions on income and gains generated outside of Cyprus.
NOMAD TAX can assist you with this process: consultancy with our experts (HERE).
Frequently Asked Questions (FAQs)
- What are the tax benefits of registering a company in Cyprus? Cyprus has a corporate tax rate of 12.5% and offers double taxation treaties with many countries. Additionally, there are tax exemptions for investments and dividends, providing companies with significant tax advantages.
- How can I obtain tax residency in Cyprus? To become a tax resident in Cyprus, you need to spend at least 183 days a year in the country and provide certain documentation, including a passport, a certificate of no criminal record, and proof of sufficient income to cover your expenses.
- What is the 60-Day Rule for tax residency in Cyprus? Cyprus offers a unique 60-Day Rule for non-dom residents, allowing them to be subject to taxes in the country only on their income generated in Cyprus during a 60-day period. This rule is especially attractive for digital nomads and entrepreneurs.
- How can European citizens establish residency in Cyprus? European Union citizens have the right to reside in Cyprus without a specific visa or residence permit. However, obtaining the yellow slip (Certificate of Registration of Residence) is advisable for establishing permanent residency in Cyprus.
- What are the tax rates in Cyprus for individuals? Cyprus has a progressive income tax system with rates ranging from 0% to 35% based on income. The first €19,500 of income is tax-free, and there are exemptions for income from dividends, interest, foreign-earned salaries, and capital gains.
- What are the benefits of Cyprus’s Non-Dom Program? The Non-Dom Program in Cyprus offers significant tax advantages, including exemptions on dividends, interest, and foreign-source income. It also allows for tax residency with a minimum presence requirement of 60 days per year and access to healthcare and social security.
- How can I apply for non-domiciled status in Cyprus? To apply for non-domiciled status in Cyprus, European Union citizens should first obtain a registration certificate (yellow slip) and register with the tax authority. They must meet the presence requirement and provide necessary documentation.
- Can I get assistance with the company registration process in Cyprus? Yes, there are service providers in Cyprus that can assist with the company registration process, including consultancy services. These providers can help you navigate the requirements and steps involved.
If you still have any doubts you can watch our videos on Youtube.
