How to legally pay less taxes in Cyprus

Jan 24

Tax optimization is a legal way to reduce your tax burden by taking advantage of deductions, exemptions, and other benefits provided by the law. Cyprus offers various mechanisms that allow both locals and foreign professionals to legally minimize their tax obligations.

1. Non-Dom Program

The Non-Dom (Non-Domiciled Resident) program in Cyprus is designed to attract foreign professionals, investors, and entrepreneurs. It significantly reduces the tax burden by providing substantial tax exemptions for those who move to Cyprus and have no long-standing tax ties to the country.

Benefits:

Complete exemption from taxes on dividends, interest, and capital gains for up to 17 years.
Available to those who have not been tax residents of Cyprus in the past 10 years.

🧾 Example:
If you own shares and receive dividends, you will not be required to pay taxes on this income as long as you are registered as a Non-Dom. GESY (healthcare tax) still applies – 2.65% on dividends, interest, and salary.

2. Tax Deductions

Cyprus offers deductions which by default lower your taxable amount, but each has its own conditions and limits. Understanding these can help you optimize your tax situation further.

For personalized advice and compliance, consult a tax professional.

These deductions include:

Social and medical insurance contributions.
Voluntary pension contributions: Payments into private pension funds or savings insurance.
Life insurance: Premiums paid for life insurance policies can lower your taxable base.
Charitable donations: Contributions to certified charitable organizations.

🧾 Example:
If you make voluntary pension contributions of €2,000 per year, this amount is deducted from your taxable income.

3. Working Abroad ("90-Day Rule")

If you work abroad on behalf of a Cypriot company for more than 90 days a year, your income from this work can be fully exempt from taxation in Cyprus.

🧾 Example:
An IT company employee working remotely from another country for over 90 days does not pay taxes on that portion of their income in Cyprus.

4. Double Taxation Treaties

Cyprus has signed double taxation treaties with 67 countries, which prevent individuals from being taxed twice on the same income.

🧾 Example:
If you earn rental income from property in another country that has a tax treaty with Cyprus, you will pay taxes in only one jurisdiction.

5. Investments and Business

Registering a company in Cyprus: Corporate income is taxed at 12.5%, one of the lowest rates in Europe.
Investing in real estate: If the property is rented out, certain expenses, such as repairs or mortgage interest, can be deducted from taxable income.

Conclusion

Cyprus offers numerous legal ways to reduce your tax burden. From the Non-Dom program to tax deductions and international treaties, every resident can find suitable tools for optimization.

In future articles, we’ll explore how to apply these mechanisms in specific situations, including rental income, dividends, pension savings, and working abroad. Remember, smart use of tax benefits not only helps save money but also allows for effective financial planning.