Tax Implications by Residency Type in Cyprus
- Cyprus Law Chambers Team
- Jul 21, 2025
- 4 min read
Tax Implications by Residency Type in Cyprus
Understanding the tax implications of different residency options is crucial for making an informed decision about relocating to Cyprus. The country offers an attractive tax regime, but the specific benefits and obligations vary significantly depending on your residency status and type.
General Tax Residency Rules
Before examining specific residency types, it's important to understand that tax residency in Cyprus is determined by the "183-day rule" or the "60-day rule" for certain individuals. If you spend more than 183 days in Cyprus during a tax year, you're automatically considered a tax resident. The 60-day rule applies if you meet specific criteria including maintaining a permanent home in Cyprus, conducting business or being employed in Cyprus, and not being tax resident elsewhere.
Blue Card Holders
Blue Card holders who become Cyprus tax residents are subject to the following tax treatment:
Income Tax: Progressive rates from 0% to 35% on worldwide income. The first €19,500 is tax-free, with rates increasing progressively up to 35% for income exceeding €60,000.
Social Insurance: Approximately 8.3% employee contribution on employment income, capped at a maximum annual salary of €60,060 (as of 2024).
Special Benefits: Blue Card holders may qualify for the non-domiciled regime if they haven't been Cyprus tax residents for 17 out of the last 20 years, exempting them from Special Defense Contribution (SDC) on dividends, interest, and rental income.
50% Tax Exemption: High-earning employees (earning over €55,000 annually) may qualify for a 50% tax exemption on employment income for up to 17 years if they were not Cyprus tax residents for 10 years before employment.
Category F Work Permit Holders
Standard work permit holders face similar taxation to Blue Card holders:
Income Tax: Same progressive rates apply on worldwide income for tax residents.
20% or 30% Tax Exemption: Employees earning less than €55,000 may qualify for a 20% exemption on employment income for 5 years, or 30% for 10 years if they were not Cyprus residents for 5 years before employment.
Social Contributions: Standard employee contributions apply, similar to Blue Card holders.
Digital Nomad Visa Holders
Digital nomads have unique tax considerations:
Foreign Employment Income: If working for a non-Cyprus employer and maintaining non-resident status (staying less than 183 days), they may avoid Cyprus income tax on employment income.
Tax Resident Digital Nomads: If becoming tax resident, they're taxed on worldwide income but may benefit from Cyprus's lack of taxation on foreign dividends and capital gains under the non-dom regime.
No Social Insurance: Generally not required to contribute to Cyprus social insurance if employed by foreign companies.
Permanent Residence through Investment
Investment-based permanent residents have favorable tax treatment:
No Obligation to Become Tax Resident: Can maintain permanent residence without becoming tax resident, avoiding Cyprus taxation on worldwide income.
If Tax Resident: Subject to standard income tax rates but often benefit from non-dom status, avoiding SDC on passive income.
Capital Gains: Only taxed on gains from Cyprus real estate disposal.
Wealth Tax: Cyprus has no wealth tax, making it attractive for high-net-worth individuals.
Startup Visa Holders
Entrepreneurs face specific tax considerations:
Corporate Tax: Cyprus companies pay 12.5% corporate tax, one of the lowest in the EU.
IP Box Regime: 80% exemption on qualifying intellectual property income, resulting in an effective tax rate of 2.5%.
Personal Taxation: As company directors/employees, subject to standard income tax rates but may qualify for employment income exemptions.
Dividend Taxation: No tax on dividends received from Cyprus companies if non-dom status applies.
Student Residence Holders
Students have limited tax exposure:
Part-time Work Income: Taxed according to standard rates if exceeding the tax-free threshold.
Foreign Income: Generally not taxed if maintaining non-resident status.
Scholarships: Usually tax-exempt.
Retirement Residence Holders
Retirees enjoy several tax advantages:
Foreign Pension Income: Taxed at a flat rate of 5% on amounts exceeding €3,420 annually, or can opt for normal tax rates.
Investment Income: If qualifying for non-dom status, no SDC on interest, dividends, or rental income.
Capital Gains: Only Cyprus real estate gains are taxable.
Family Reunification Residents
Tax treatment depends on the sponsor's status and the family member's activities:
Dependents: Usually not separately taxed unless they have their own income.
Working Spouses: Subject to standard employment taxation rules.
Inherited Non-Dom Status: Family members may benefit from the sponsor's non-dom status.
Key Tax Considerations for All Residents
Non-Domiciled (Non-Dom) Regime: This is perhaps Cyprus's most attractive tax feature. Non-dom residents are exempt from:
17% SDC on dividend income
30% SDC on interest income
3% SDC on rental income
No inheritance tax on worldwide assets