What You Need to Know About Personal Taxes in Cyprus Before Registering a Company

Cyprus has long been recognized as a business-friendly environment, attracting entrepreneurs and foreign investors alike. One of the main reasons Cyprus is appealing for company formation is its favorable tax regime, which also extends to personal taxes. If you’re planning to start a business in Cyprus, understanding the personal tax landscape is crucial not only for your financial planning but also for ensuring your company remains compliant with local laws.

Cyprus offers a range of tax advantages for individuals, from its low personal income tax rates to tax exemptions on foreign income, making it an attractive location for expats and entrepreneurs. In this article, we’ll explore what you need to know about personal taxes in Cyprus before registering a company, including the tax rates, types of taxes, exemptions, and key considerations for business owners.

Cyprus Personal Income Tax System

The personal income tax system in Cyprus is progressive, meaning that the more you earn, the higher your tax rate. Cyprus’s personal income tax system is one of the most competitive in Europe, with relatively low tax rates and exemptions for foreign income, making it a desirable destination for individuals and business owners. Below are the key aspects of personal income tax:

Tax Rates

As of 2025, Cyprus applies the following personal income tax rates for individuals:

Up to €19,500: 0% (no tax is applied to income below this threshold)
€19,501 to €28,000: 20%
€28,001 to €36,300: 25%
€36,301 to €60,000: 30%
Above €60,000: 35%

These tax brackets apply to individuals who are residents of Cyprus for tax purposes. A Cypriot tax resident is someone who spends more than 183 days in Cyprus in a calendar year or 60 days in some cases where the individual has business interests or employment in Cyprus. For those who qualify for tax residency, Cyprus offers a favorable tax environment with low overall personal tax rates.

Special Tax Regime for Non-Domiciled Residents

Cyprus offers an attractive non-domiciled tax regime for individuals who have not been domiciled in Cyprus for at least 17 years prior to their tax residency. Non-domiciled residents are eligible for several key exemptions, including:

Exemption from Special Defence Contribution (SDC) tax on dividend income, interest income, and rental income.
Exemption from taxation on foreign income, including dividends from overseas investments, providing you meet certain conditions.

This regime is designed to attract foreign high-net-worth individuals, business owners, and skilled professionals to relocate to Cyprus and benefit from a favorable tax environment. It also positions Cyprus as a prime location for international entrepreneurs, allowing them to benefit from lower personal taxes while continuing to earn income globally.

Other Personal Taxes in Cyprus

Aside from personal income tax, Cyprus also levies certain other taxes that business owners need to consider:

Social Insurance Contributions: Employees and self-employed individuals must pay contributions to the Social Insurance Fund. Employees pay 8.3% of their monthly salary, while employers contribute an additional 8.3%. Self-employed individuals also pay a percentage of their income to the fund based on their earnings.
Personal Tax on Pension: Cyprus taxes pension income at a rate of 5% for amounts above €3,420 per year, which is considered relatively low.
Capital Gains Tax: There is no capital gains tax on the sale of securities such as shares or bonds, making it an attractive proposition for individuals investing in assets like stocks, mutual funds, and cryptocurrencies.

Tax Exemptions and Reliefs for Cyprus Residents

Cyprus provides several exemptions and tax relief opportunities that can be advantageous to entrepreneurs and company owners. These tax exemptions help ensure that individuals pay only a fraction of their income in taxes, depending on their financial situation.

Foreign Income Exemption

One of the most attractive features of the Cyprus tax regime for expatriates and business owners is the exemption on foreign income. As a Cyprus tax resident, you can benefit from tax exemptions on:

Dividends: Cyprus does not tax dividend income, whether it is sourced locally or from abroad, unless the dividends come from a company involved in activities like trading in real estate or intellectual property (IP).
Interest: Interest income from foreign investments is also exempt from personal taxes for non-domiciled residents.

These tax exemptions allow business owners to maintain a higher income level and keep more of their earnings from international business activities or investments.

50% Tax Exemption for New Employment

Cyprus also offers a 50% income tax exemption on income earned from employment for individuals relocating to the island for the first time. This exemption is granted to those who have not been tax residents in Cyprus for the previous 3 years and is available for up to 17 years, depending on the conditions met. For individuals earning above €100,000 annually, this exemption can be highly advantageous for those looking to relocate and start a business in Cyprus.

Personal Tax Deductions

There are several personal tax deductions available to Cyprus tax residents. Some of the most common deductions include:

Donations to charity: Donations to approved charitable organizations in Cyprus are fully deductible.
Interest on loans: Interest paid on loans used for business or investment purposes may also be deducted from taxable income.
Contributions to pension schemes: Contributions to pension schemes can also be deducted, reducing taxable income.

These deductions can lower the amount of tax you owe and make Cyprus even more attractive as a business hub.

Personal Taxes for Business Owners in Cyprus

For entrepreneurs planning to register a company in Cyprus, understanding personal tax implications is vital. Business owners need to consider how personal income taxes interact with their business profits, especially when it comes to paying themselves from the company. Cyprus offers various options for structuring business income to minimize personal taxes:

Paying Yourself via Salary vs. Dividends

As a business owner, you may choose to pay yourself via salary or dividends, each with different tax implications:

Salary: Salaries are subject to personal income tax, with the applicable rates based on the income brackets mentioned above. In addition, both the employer and the employee contribute to social insurance and other mandatory contributions.
Dividends: If you pay yourself dividends from your company’s profits, these payments are not subject to personal income tax in Cyprus, but you will still need to comply with corporate tax obligations. The dividends you receive from your company will be exempt from tax in Cyprus under the non-domiciled resident regime.

Entrepreneurial Tax Reliefs

Cyprus also provides a range of tax relief options for entrepreneurs who qualify under specific schemes, such as:

Start-up tax reliefs: Start-up businesses may be eligible for tax incentives and exemptions, helping them reduce their initial financial burdens and focus on growth.
R&D Tax Relief: Cyprus offers tax incentives for companies involved in research and development activities, including significant deductions for qualifying R&D expenses.

Why Choose B2B Hub for Company Formation in Cyprus?

Navigating the tax system in Cyprus can be complex, especially for new business owners. At B2B Hub, we specialize in helping entrepreneurs understand the intricacies of personal and corporate taxes, ensuring compliance while minimizing tax liabilities. Our expert team provides a comprehensive range of company formation services in Cyprus, including:

Business Structure Consultation: We help you choose the optimal business structure based on your personal tax preferences and business objectives.
Tax Planning: We provide guidance on personal and corporate tax strategies that align with your business goals.
Corporate Compliance: We handle all necessary paperwork and legalities, ensuring your business complies with Cyprus’s tax regulations and corporate laws.
Ongoing Support: From tax filing to strategic business advice, B2B Hub provides continued support as your business grows.

By choosing B2B Hub, you benefit from our expert understanding of Cyprus’s personal tax system and the local business landscape, allowing you to focus on growing your company without worrying about compliance issues.

For inquiries, please contact us at +44 770 018 3107, visit our website at b2bhub.ltd, or send us an email at reg@b2bhub.ltd. Let B2B Hub help you navigate the personal tax landscape in Cyprus and establish your business successfully.