A new life abroad means finding somewhere to live and looking for, or maybe relocating with work. How does finance and tax in Cyprus affect you though?
For those of you that are considering a move to Cyprus, there will be many different motivations.
Some of you will be retiring and therefore not have to worry too much about finance and tax in Cyprus.
If you have dividends or interest, then it is wise to check out the Defence Tax affects you though.
For others that will be working or perhaps running their own business, you will need to carry out your research.
While you are probably looking forward to the warm climate and perhaps the easier pace of life, you do still need to face the realities of having everything in order.
Like practically every country, there are tax laws to observe. There is no escaping from the dreaded income tax. In addition to this, there are the essential contributions like social security.
If you have income in more than one country, this will also be a consideration. Let’s take a look at the various taxes in Cyprus and how they might affect you.
Let’s take a look at the various taxes in Cyprus and how they might affect you.
Tax obligations when moving to a new country
Are you looking forward to a better quality of life and a more laid back lifestyle? While this may be the motivation for your move, there are still financial obligations to deal with.
You need to make sure that you are meeting these tax and financial requirements of Cyprus. Now for some, this will be pretty straight forward.
If you are self-employed, however, you will need to register as such. You will also need to submit tax returns and ensure that you make the necessary social security contributions.
As you are going to be leaving the country where you once paid tax, you need to tie up loose ends. Make sure the tax department are aware of your circumstances and that you are up to date with tax owed. If you submit tax returns, then you need to make sure these are up to date.
If you are employed, then it may be that you need to do a partial self-assessment at the end of the year. You may be due to a tax refund. It is important to check what is required of you.
When you arrive in Cyprus, you need to inform the authorities of your arrival. Make sure you declare to the tax department if you are self-employed or registering a business.
Income tax rates in Cyprus
The income tax rates in Cyprus is progressive. Like many countries, the more you earn, the higher percentage you pay.
no tax to pay
For all earnings of EUR 19,500 or below, there is no tax to pay.
Once you reach earnings of EUR 19,000 up to EUR 28,000, then you must pay 20% on all earnings over EUR 19,000.
There are then 25%, 30% and 35% thresholds.
35% is payable on earnings over EUR 60,000.
If you are employed, then your tax will be deducted from your salary and paid by your employer.
If you are self-employed, then you will be required to self-assess and submit a tax return.
There are various tax allowances for charitable donations and trade union fees.
All of the core taxes – income tax, corporate tax, VAT and social security are collected by the government.
Social security contributions in Cyprus
The Social Insurance Scheme covers all employees and the self-employed in Cyprus. Under the scheme, the insured are entitled to many benefits should the need arise. These benefits include sickness, maternity, invalidity pension, unemployment, old-age pension, widows’ pension and more. There is also a funeral grant.
While employees are entitled to all benefits, the self-employed are not entitled to unemployment benefit and accident at work or occupational diseases.
The contribution to the scheme for the employed is shared between the employee, the employer and the state.
For self-employed, the contributions are shared between the self-employed person and the state. The self-employed person pays the larger share.
Corporate tax in Cyprus
There is a reason many companies choose to set up their HQ in Cyprus.
The corporate tax rate is just 12.5%!
The corporate tax rate is just 12.5%! This is very low when you compare it to many other European countries.
Company tax is due on the 1st August of the following year.
The regulations for finance and tax in Cyprus state that you must pay corporate tax on your worldwide earnings if your company is a resident company of Cyprus. If you are just operating a branch or office in Cyprus however, you only have to pay corporate tax on profits made in Cyprus.
VAT in Cyprus
The standard rate of VAT in Cyprus is 19% which has increased from 18%.
There are reduced rates of 9% and 5% for certain goods and services. In addition to this, there are also some VAT exemptions.
If you are a company trading in Cyprus, then you will need to register for VAT if your turnover is EUR 15,600 or more.
You will be required to register for VAT, keep accurate records and submit a VAT return according to the laws of finance and tax in Cyprus.
Other Cyprus Taxes
In addition to the main taxes which are collected centrally, there are others including Capital Gains Tax.
One tax which you may not have heard of is the Defence Tax. This is a contribution that people have to make for dividends, bank interest and rent, for example, and ranges from 17 – 30%.
Immovable Property Tax was abolished at the start of Jan 2017 so make sure that any information you find is up to date.
If you have any doubts about taxes, then it is advisable to seek the help of an expert. There are many financial institutes based in Cyprus, and there are a large proportion of English speaking people. You should be able to find a professional advisor that can answer any questions you might have.
Having everything in order before you move will make the adjustment to your new home so much easier.