Whether you're a resident or a non-resident, taxation, which includes income tax, immovable property tax, capital gains tax, inheritance tax, and value added tax, is an important factor to take into account when purchasing a home in Cyprus.
You must pay Cypriot income tax on your global earnings if you permanently reside in Cyprus. The good news is that, particularly for those who choose to retire there, tax rates are among the lowest in Europe. Additionally, Cyprus has double taxation agreements with a large number of nations, which are meant to prevent taxes on income that have already been paid in one country from being paid again in another. Living in Cyprus also has other benefits, such as the absence of wealth, gift, or inheritance taxes.
Historically, Cyprus has been regarded as a favorable tax jurisdiction, if not exactly a tax haven. The government established a set of tax incentives in the 1970s in an effort to draw "offshore" businesses to the island, which ensured its success as a hub for European finance. However, once it was decided that Cyprus should become a member of the EU, its tax laws had to be updated to meet EU standards and adhere to OECD initiatives against unfair tax practices. As a result, significant changes to Cyprus' tax code went into effect on January 1st, 2003, some of which temporarily hurt the nation's economy. The following are the primary tax law changes that have occurred since January 1, 2003:
Any person who lives in Cyprus for more than 183 days during an accounting year (the first of the year to the end of the year) is required to pay local taxes on their worldwide income. Only the income earned in Cyprus is taxed for non-residents.
The distinction between "resident" and "non-resident" has replaced the terms "alien" (foreigner) and "citizen of the Republic" in terms of taxation.
Exchange controls and limitations on the import and export of money are no longer in place. According to EU regulations, financial and banking institutions are gradually being liberalized.
Although Cyprus' tax laws have been brought into line with those of other EU nations, the country still has low tax rates. Depending on your circumstances, you may be able to save a significant amount of money on taxes if you qualify for or choose to be a tax resident in Cyprus rather than your home country. It is therefore crucial to seek professional advice.