The Cyprus Parliament is considering 2 draft laws on tax benefits for wealthy foreigners

October 6, 2020
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Cyprus: The draft law of tax benefit for wealthy foreigners
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The Cyprus Ministry of Finance proposes to introduce new and extend the existing tax benefits for wealthy foreigners. Members of the Cypriot Parliament are considering 2 draft laws amending the country’s tax laws.

The Ministry of Finance notes that the main purpose of the amendments is to attract wealthy people to the country who will develop the island’s economy. First of all, we are talking about foreign businessmen: tax benefits will be an excuse to relocate company head offices to Cyprus.

What tax benefits are set out in the draft laws

The Ministry of Finance propose two main changes.

  1. Foreign citizens will be able to pay 50% of the income tax rate. The period of validity of the benefit is not specified.

    Benefits are available in two cases:

    • A foreigner previously had no official resident status in Cyprus. They apply for a status, such as a residence permit, and plan to work or conduct business in the country. His income in his first year in Cyprus is over 100,000 €.
    • A foreigner is already working or doing business in Cyprus, i.e. has an official status – for example, a residence permit. At the same time, his/her annual income exceeded 100 000 € during any 3 years out of 5 before employment in Cyprus.
  2. Extend the tax benefit for income tax for foreign nationals. These are employees or entrepreneurs who, until their current employment in Cyprus, had no official resident status.

    The benefit is 20% or €8,550 – whichever is the lower. The benefit is now valid until the end of 2020. The draft law proposes to extend it for 5 years, i.e. until the end of 2025.

The Government of Cyprus has not yet made draft legislation publicly available.

In our opinion, innovations are primarily of interest to entrepreneurs who plan to obtain Cyprus citizenship for their investments. They will be able not only to become residents of an EU country, but also to optimise taxation of personal income.

The Institute of Certified Public Accountants of Cyprus (ICPAC) has supported the draft legislation. Its representatives noted that through tax incentives the country will be able to attract senior executives with a high level of income.

We believe that the new legislation is developed to compensate for possible losses due to the new double taxation agreement (DTA) between Cyprus and Russia.

New DTA conditions between Cyprus and Russia

At the beginning of September 2020, Konstantinos Petridis, Minister of Finance of Cyprus, and Alexei Sazanov, Deputy Minister of Finance of the Russian Federation, signed a new SIDN with amendments and exceptions. The document will come into force on 1 January 2021.

New DTA conditions between Cyprus and Russia

At the beginning of September 2020, Konstantinos Petridis, Minister of Finance of Cyprus, and Alexei Sazanov, Deputy Minister of Finance of the Russian Federation, signed a new SIDN with amendments and exceptions. The document will come into force on 1 January 2021.

We discussed this in more detail in the article “Cyprus and Russia signed a new double taxation agreement”.

Under the new terms, dividends and interest which the taxpayer transfers from Russia to Cyprus will be taxed in Russia at an increased rate of 15%.

Taxes in Russia will be not be paid in following cases:

  • in the transfers of dividends from regulated organisations – for example pension funds and insurance companies;
  • in the transfer of dividends from listed companies whose shares are traded on the stock exchange;
  • in the transfer of interest from government, corporate and Eurobonds.

Following the results of 2019 Cyprus has taken the first place in the list of the states which Russian citizens specify as the country of tax residence. This can be explained by the low tax rates.

The following taxes currently apply in Cyprus:

  • on income from corporations 一 12.5%;
  • capital gains 一 are only charged on the sale of a company in Cyprus or a property owned by the company;
  • VAT 一 19%. This is the lowest rate in the European Union;
  • 一 dividends are not levied.


For more details about the rating of countries, we described in the material “Foreign Assets and Tax Residence of Russians: 2019 Data and Trends”.

Thus, the change in DTA from 2021 may lead to the withdrawal of Russian business from Cyprus. The new tax benefits will help attract entrepreneurs to the country and compensate for economic losses, hopes the government of Cyprus.

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