Cyprus Taxes: A Complete Guide for US Expats

If you’re looking for a country with stunning beaches, rich history, a lower cost of living, and healthy, delicious cuisine, you can’t go wrong with Cyprus. This Mediterranean island nation has long flown under the radar, but its reputation as an expat hotspot is on the rise. Of course, before moving there, it’s important to consider practical matters — like Cyprus taxes.

Given how much taxes can affect your take-home pay, it’s well worth setting aside some time for tax planning. That said, we know that information about other countries’ tax systems can be hard to find (and even harder to understand).

As a tax firm that specializes in working with US expats, we’ve worked with clients all over the world — and in the process, gained first-hand experience with international tax systems. Below, we’ve put together a brief but detailed guide to Cyprus taxes. Read on to learn what taxes in Cyprus are like, how a move abroad affects US taxes, how to lower your tax bill, and more.

Snapshot of taxes in Cyprus

• Primary tax form(s): Personal Income Tax Return (TD1)
• Tax deadline: October 31st for 2024, although deadline is typically July 31st, and can vary from year to year
• Reporting website: TAXISnet
• Administrative language(s): Greek
• US-Cyprus tax treaty? Yes
• US-Cyprus totalization agreement? No

Understanding Cyprus’ tax system and deadlines

The Cyprus Tax Department is the governing body responsible for implementing tax laws, collecting tax revenue, organizing tax treaties with other countries, and communicating information to the public.

All tax residents must file a tax return, as must nontax residents with income from sources in Cyprus. 

Tax residents are generally subject to taxation on their worldwide income unless they don’t maintain a domicile in Cyprus. Non-domiciled tax residents of Cyprus are typically exempt from the Special Defence Contribution (SDC) taxes, i.e. the tax placed on most types of passive income. However, they must still pay all other income taxes.

The tax due dates tend to vary from year to year. Tax returns for the 2023 tax year were originally due July 31st, but Cyprus’ government pushed the deadline back three months to October 31st.

The easiest way to pay taxes is generally by submitting through the Cyprus Tax Department’s online portal, TAXISnet. Paper forms are available as well, but only in Greek.

Determining Cyprus tax residency

In Cyprus, anyone who meets either the 183-day rule or the 60-day rule counts as a tax resident. The 183-day rule states that anyone who spends more than 183 days in the country in a given tax year is a tax resident. 

The 60-day rule, on the other hand, states that individuals who stay in Cyprus for at least 60 days out of the tax year and meet all of the following conditions count as tax residents:

• Haven’t resided in any one country for more than 183 days out of the year
• Do not qualify as tax residents in another country
• Have existing ties to Cyprus (e.g. business, family, home)

All American citizens and permanent residents are US tax residents, even if they live abroad — making them unable to meet the 60-day rule.

Taxation of income in Cyprus

Cyprus has a progressive, marginal tax system where income tax rates increase as you earn more money. They levy taxes on most types of earned income at the following rates:

Personal income tax (PIT) rates in Cyprus for tax year 2023

Income (EUR)	Income (USD)	Tax rate	Accumulated tax (EUR)	Accumulated tax (USD)
€0 – €19,500	~$0 – $21,517	0%	€0	$0
€19,501 – €28,000	~$21,518 – $30,904	20%	€1,700	~$1,876
€28,001 – €36,300	~$30,905 – $40,065	25%	€3,775	~$4,167
€36,301 – €60,000	~$40,066 – $66,223	30%	€10,885	$12,014
€60,001+	~$66,224+	35%

The amount of taxes you pay for other types of income, however, may vary:

• Dividends & interest: Generally 17%; 3% for certain Cyprus-based investments
• Rental income: PIT rates (0% – 35%, depending on overall taxable income) + 2.25%
• Capital gains income: Generally exempt, with 20% on gains from Cyprus-based immovable property if they aren’t already subject to PIT
  • Note: Cyprus tax residents can exclude up to €85,430 (~$94,320) in capital gains from taxation over their lifetime
• Corporate income: 12.5%, applicable to Cyprus-based companies

Its low corporate tax rates are particularly attractive for entrepreneurs looking to register their business in a low-tax country. Cyprus also charges just a flat 5% tax on foreign pension income, with the first €3,420 (~$3,774) exempt — making it an increasingly popular retirement destination.

Deductions & allowances

Cyprus allows for personal tax deductions of up to ⅕ of your income through expenses like:

• Charitable contributions
• Life insurance premiums
• Social security contributions
• Pension contributions
• Employment-related expenses

You can also deduct:

• Business expenses 
• Up to 50% (capped at €150,000, or ~$165,667)  of investments in approved innovative small or medium-sized businesses
• Up to 20% of AV and technical equipment related to the audiovisual industry

Other taxes in Cyprus

Property taxes

Some taxes associated with property in Cyprus include:

• Property transfers: 3% to 8%, depending on value
  • Does not apply to property purchases subject to VAT; can be lower in some cases, especially when transferring between family members or trustees
• Mortgage registration fees: 1%
• Stamp duty: 0% to .2%, depending on value

There is no annual property tax, as the House of Representatives abolished it in 2017.

Social security taxes

There are two kinds of mandatory social security taxes in Cyprus:

• Social insurance tax: 
  • Employees: 8.8%, capped at €62,868 (~$69,414)
  • Self-employed: 16.6%
    • Note: Social security taxes for those who are self-employed in Cyprus will increase every five years until they reach 20.4% in 2039
• Healthcare:
  • Employees: 2.65%
    • Note: Also applies to pensioners and those earning certain types of passive income
  • Self-employed: 4%

VAT

Cyprus levies a standard value-added tax (i.e. sales tax) of 19%. However, there are reduced rates for various goods and services:

• 9% VAT: Accommodation, restaurants, local passenger transport services
• 5% VAT: Foods, pharmaceutical products
  • Applies to certain types of new construction real estate purchases as well
• 3% VAT: Books/magazines/newspapers, cleaning services, artistic performances
• 0% VAT: Educational services, medical services, financial services

Estate tax

Good news for Americans living in Cyprus — there are no taxes on inheritances, gifts, or estates!

US taxes for expats in Cyprus

The US has a citizenship-based taxation system, which means all American citizens and permanent residents are subject to US taxes — even if they move abroad. The government requires those who earn above a certain threshold to file (and potentially pay) federal income taxes.

While most Americans file on April 15th, expats get an automatic extension to June 15th. You can push that deadline back even further to October 15th upon request. No matter when you file your return, though, you’ll need to pay your tax bill by April 15th.

If you’re also a tax resident of another country, you’re potentially on the hook for two different income tax bills. Although Cyprus has a tax treaty with the US that seemingly eliminates the risk of double taxation, a tricky clause negates most benefits for Americans. Fortunately, there are other ways to reduce your tax burden.

Two of the most valuable tax breaks for US expats include the:

Foreign Tax Credit (FTC)

Claiming the FTC gives you dollar-for-dollar US tax credits for any foreign income taxes you’ve paid. This often greatly reduces, if not completely eliminates, your US tax liability. If you pay higher taxes abroad than in the US, you can cover your tax bill and then some with excess credits to use on future tax bills (up to ten years).

To be FTC eligible, foreign taxes must be legal, based on income, charged to you specifically, and paid. You can claim the FTC by filing Form 1116.

Foreign Earned Income Exclusion (FEIE)

The FEIE, on the other hand, lets Americans abroad exclude a portion of their foreign-earned income from US taxes. 

You can exclude up to $120,000 for tax year 2023 and $126,500 for tax year 2024 (the limit increases a bit each year to account for inflation). Keep in mind that this exemption applies only to earned income like salary and wages — not passive income like distributions, interest, dividends, or rental income.

To be eligible for the FEIE, you must first pass the Physical Presence Test or Bona Fide Residence Test. If you do, you also automatically qualify for the Foreign Housing Exclusion, which can help you offset qualifying housing expenses (e.g. rent, occupancy taxes, parking fees). You can claim the FEIE by filing Form 2555.

Reporting obligations

While expats have a couple of special tax benefits, they may need to fill out some new reports related to their foreign financial holdings. This includes the:

• Foreign Bank Account Report (FBAR): Americans with over $10,000 in foreign financial accounts must file the FBAR (FinCEN 114). It doesn’t have to be all in one account, either. If the sum total of your foreign financial accounts’ holdings surpasses the $10,000 threshold, you must file an FBAR. 
• Statement of Specified Foreign Assets (Form 8938): Form 8938 is mandatory for Americans abroad with more than $200,000 in foreign assets on the last day of the tax year, or more than $300,000 in foreign assets at any point during the tax year.
  • Note: Married couples filing jointly and US-based filers have different thresholds.

Resources: 

1. Tax Department | History
2. Cyprus – Individual – Income determination
3. Extension of Submission Date for Income Tax Return (T.D.1) for Individuals in Cyprus
4. Cyprus – Individual – Residence
5. Cyprus – Individual – Deductions
6. Cyprus – Individual – Other taxes
7. Cyprus Property Taxes: Complete Guide for Buyers and Sellers
8. Free Trade Zones in Cyprus
9. Countries With the Lowest Income Tax in Europe
10. Cost of living in Cyprus: a detailed guide for expats