Tax Benefits of Living in and Investing in Cyprus
Updated 13/06/2025
Cyprus offers one of the most favourable tax regimes in the European Union.
Corporate tax is levied at a flat 12.5%, one of the lowest rates in Europe. Personal income is taxed progressively up to 35%, but the first €19,500 of annual income is entirely tax-free. Dividend and interest income are fully exempt from income tax, and Cyprus imposes no inheritance, wealth, or gift tax. Cyprus also maintains an extensive network of over 60 double taxation agreements (DTAs), helping prevent double taxation and reduce withholding taxes on cross-border payments. These features, combined with EU legal standards, investor protections, and straightforward residency rules, make Cyprus highly attractive for both residents and international investors.
Key tax highlights:
- Low corporate tax: Flat 12.5% rate (below the EU average).
- Generous personal allowance: First €19,500 of income is tax-free.
- Tax-exempt income:
- Dividends and most interest income are exempt from personal income tax.
- Non-domiciled residents pay 0% tax on dividends, interest and most capital gains (including foreign income) for up to 17 years.
- No death taxes: No inheritance or gift tax.
- Double taxation relief: Over 60 DTAs (including with the UK, Germany, China and others) reduce or eliminate tax on cross-border dividends, interest and royalties.

Personal Income Tax Benefits for Residents
EU Citizens
Citizens of EU/EEA member states can move to Cyprus freely without a visa, making relocation simple. Once they become
Cyprus tax residents, EU nationals enjoy full access to Cyprus’s tax incentives, including the non-domicile regime, which exempts foreign dividends, and rental income from taxation. They also benefit from the same pension-friendly rules as other residents, as well as no inheritance or gift tax, making Cyprus particularly attractive for long-term planning.
Non-EU Investors
Non-EU nationals must obtain residency, commonly by purchasing real estate. Once tax-resident, they are treated much like EU residents. Importantly, Cyprus offers generous expatriate tax incentives regardless of EU status. For instance, newcomer workers earning €55,000 or more per year from Cyprus employment receive a 50% personal income tax exemption for 17 years. Even lower salaries can benefit from transitional relief up to €8,550 per year, a legacy measure currently under review for potential enhancement. Non-EU investors also enjoy the familiar non-dom exemptions: 0% tax on dividends, interest and capital gains for 17 years. In short, once a non-EU investor meets Cyprus tax residency (via 183-day or 60-day rules), they receive essentially the full range of Cyprus tax benefits for residents, including those listed above.

Retirees
Retirees who make Cyprus their home benefit from one of Europe’s most pension-friendly tax regimes. Cyprus tax residents must report worldwide pension income but can choose each tax year how it is assessed: either include it under the normal income tax bands (which start at 0% on income up to €19,500) or apply a flat 5% rate on pension income exceeding €3,420 or include it in standard income tax (starting at 0% on €19,500). Most retirees opt for the 5% flat rate on foreign pension income, which is often more favourable. Moreover, pension lump-sums (such as retirement gratuities or one-off withdrawals) are not taxed in Cyprus. The country also imposes no inheritance or gift tax, offering further advantages for retirees concerned with estate planning. Combined with access to public healthcare and a high quality of life, these tax benefits make Cyprus a top retirement destination for EU and non-EU nationals.

Digital Nomads
Cyprus has crafted specific incentives for remote workers and digital nomads. Individuals who qualify as Cyprus tax residents (by spending >183 days or using the 60-day rule) enjoy the island’s full tax benefits. In practice this means 0% tax on dividend income and capital gains (except gains from selling Cyprus real estate). Crucially, Cyprus also grants a 50% income tax exemption on foreign-earned income above €55,000 for up to 17 years. In effect, a nomad earning, say, €70,000 abroad would pay taxes on only half the excess (€15,000 taxed normally). These tax benefits, combined with Cyprus’s warm climate and EU safety, make it an attractive hub for location-independent professionals.

Corporate Tax Advantages
Cyprus is equally generous to companies. All Cyprus-resident corporations pay 12.5% corporate tax on worldwide profits with many expenses and investments deductible. Significantly, Cyprus does not levy withholding taxes on dividends or interest paid to foreign shareholders. This means companies can repatriate profits or invest across borders with minimal extra tax. For example, under Cypriot law dividends distributed to non-resident shareholders bear no Cyprus withholding tax. Local law firms note that this makes Cyprus a favoured location for holding companies, especially since foreign tax credits and treaties further prevent double taxation. Cyprus also imposes no withholding on most royalties paid abroad, and its network of DTAs (tax treaties) helps reduce tax on cross-border interest and royalties. For shipping and certain industries, even special tonnage and IP regimes can yield additional savings. Overall, the 12.5% rate plus these exemptions position Cyprus as one of Europe’s most business-friendly tax jurisdictions. Notably, qualifying intellectual property income can be taxed at an effective rate as low as 2.5% under Cyprus’s IP Box regime, offering further advantages for innovation-driven businesses.

Property Investment Tax Benefits
Cyprus provides compelling tax incentives for property buyers, whether buying a home or an investment.
Residential Property
Buying a property in Cyprus offers lifestyle comforts and tax perks. For example, new primary residences qualify
for a reduced 5% VAT (instead of the standard 19%) on the first €350,000 of the purchase price (up to 130m²), provided that the total value does not exceed €475,000, the area is under 190m², it is the buyer’s first use of the scheme, and the property
is used as their primary home for at least 10 years. These rules apply to properties for which the application for a planning permit was submitted after November 2024. Properties with planning permit applications submitted before this date may still benefit from the previous rule, which allowed the 5% VAT rate on the first 200m² of a primary residence.
On sale, capital gains tax on private residences is capped at 20%, but there is a generous allowance (currently €85,430 tax-free) for principal homes. Moreover, Cyprus abolished annual property taxes and has no inheritance tax, so primary homes can often transfer to heirs without tax. Notably, only gains on Cyprus-situated property are taxed – foreign real estate sales incur no Cyprus tax. These policies make owning a Cyprus home especially attractive for long-term residents.
Investment Property
For rental or investment properties, Cyprus also offers efficiency. Rental income is taxed under normal income rules, but property owners may deduct most related expenses such as maintenance, management fees, and mortgage interest when computing taxable profit. This effectively reduces the tax burden on rental yields. Importantly, Cyprus’s network of double tax treaties ensures that rental income is generally taxed only once – either in Cyprus or in the owner’s country of residence or in Cyprus, depending on the treaty terms. When an investment property is sold, Cyprus levies a 20% capital gains tax on the profit derived from Cyprus-located immovable property (i.e. land and buildings). However, no capital gains tax is imposed on the sale of i) shares in companies owning foreign property, or ii) assets located outside Cyprus. In combination, these rules create an efficient and transparent tax environment for real estate investment, whether residential or commercial.

Benefits of Buying through Domenica Group
When you buy a Cyprus property with a reputable developer like Domenica Group, you gain added peace of mind on the tax and legal front. Domenica offers an in-house legal team and long-standing partnerships with top Cypriot law firms, ensuring every transaction is handled by experts who understand Cyprus tax and residency rules from day one. Our specialists stay fully up to date with the latest regulations, so you won’t face unexpected issues or hidden surprised. In practice, this means foreign buyers, retirees, and digital nomads benefit from smooth, tax-efficient purchase structuring and expert assistance in claiming available exemptions.
Ready to learn more? Cyprus offers unique tax advantages for its residents and property owners. Fill out the contact form below to receive up-to-date news, detailed guidance and personalised assistance with your Cyprus relocation or investment. Our team is standing by to help you take advantage of Cyprus’s tax-friendly environment and find the perfect home or investment.
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