Understanding Taxes in Cyprus: A Retiree’s Guide

Introduction
Moving to Cyprus offers not only a sunny climate and relaxed lifestyle but also a favourable tax system. For retirees and foreign investors, understanding Cyprus’ taxes can help you keep more of your income and plan effectively. This guide explains key taxes, exemptions, and benefits in plain English.

Higher Personal Allowances

• Cyprus offers a personal allowance of €20,500, meaning your income up to this amount is tax-free.

• In comparison, Germany taxes income above approximately €12,000.

• This allows retirees and new residents more disposable income for living expenses or leisure.
  

Retirement Income and Pension Taxation

• In Cyprus, retirees can choose between the standard tax system or a flat-rate option, paying only 5% on pension income above €3,420 annually.

• This simple approach reduces paperwork and makes financial planning predictable.
  

Non-Domicile Status and Capital Gains

• If you relocate your primary residence to Cyprus but maintain non-domicile status, dividends, interest, and rental income are exempt from the Special Defence Contribution (SDC) for up to 17 years.

• This allows your investments and savings to grow without additional taxation.
  

No Inheritance or Gift Tax

• Since 2017, Cyprus has abolished both inheritance and gift taxes.

• You can pass on assets to family members without them being reduced by tax.

• This is particularly attractive for retirees looking to preserve wealth for their heirs.

  
  

Corporate Tax and Investment Income

• Cyprus has a 12.5% corporate tax rate, one of the lowest in the EU.

• Capital gains from the sale of securities are tax-free for individuals, providing opportunities for retirees to manage investments efficiently.
  

VAT and Everyday Purchases

• The standard VAT rate is 19%, similar to Germany.

• Reduced rates apply:

  • 5% for essential items like basic food, books, and medicines.

  • 9% for hotel and restaurant services.

• This can save money on daily living costs and leisure activities.
  

Double Taxation Treaty with Germany

• Cyprus has a double taxation agreement with Germany.

• This ensures that income is only taxed once, either in Germany or Cyprus, depending on residency status.

• It simplifies financial planning for retirees who receive pensions or investments from Germany.
  

Simplified Administration

• Cyprus’ tax system is digital and less bureaucratic than many European countries.

• Most processes, including filing returns and verifying payments, can be handled online.

• This reduces paperwork and allows retirees to focus on lifestyle rather than administrative tasks.
  

Key Takeaways

Cyprus’ tax system offers retirees several advantages:

• Higher personal allowances and lower tax rates on pensions.

• Exemptions on dividends, interest, and rental income for non-doms.

• No inheritance or gift tax.

• Low corporate tax and capital gains exemptions.

• Reduced VAT rates on essentials and services.

• Digital processes for easier administration.

With these benefits, retirees can maximise income, simplify finances, and enjoy more freedom in their retirement years.

Planning Your Finances in Cyprus

Elysia Retirement Homes can help you navigate Cyprus’ tax system:

• Advice on pension taxation and non-dom status.

• Guidance on investment planning and capital gains.

• Assistance with understanding VAT, municipal fees, and other expenses.

CONTACT US

Simply fill out the form, and our team will respond promptly to provide the information or support you need.