Cyprus is not merely an investment hub but a life destination. Having established itself as one of the leading international relocation destinations, our country consistently attracts growing interest, primarily from High Net Worth Individuals (HNWIs).
This interest is not coincidental but reflects Cyprus’ ability to offer a balanced and attractive combination of financial incentives and quality of life. Through strategic tax advantages, such as the “non-dom” regime and significant exemptions on investment income, combined with access to the European market, Cyprus ensures stability and growth potential.
At the same time, the natural environment, mild Mediterranean climate and high quality of everyday life offer a lifestyle framework that exceeds investment expectations. Cyprus, therefore, is not only an attractive investment destination but also a place one can choose as a permanent base, both professionally and personally.
Tax Residency
The Cypriot personal tax system is primarily based on an individual’s tax residency status, which determines the applicable tax base for taxpayers.
Cyprus applies the “183-day criterion” to assess tax residency. If an individual spends more than 183 days in Cyprus during a calendar year, they are considered as tax residents for that year. For those who do not meet the 183-day criterion, Cyprus provides an alternative through the “60-day rule.” Under this rule, an individual can qualify as a tax resident by spending a total of 60 days in Cyprus during a calendar year, provided they also meet the following conditions:
• They do not spend more than 183 days in any other country.
• They are not tax residents in any other country.
• They maintain a permanent home in Cyprus (either owned or rented).
• They conduct business in Cyprus, are employed in Cyprus or hold an office in a Cyprus tax-resident company, with such activity not being terminated by the end of the year.
Once recognized as tax residents, individuals will be taxed on their worldwide income in Cyprus and may be eligible for various favourable tax regimes and deductions.
Tax Regimes Relating to Employment
HNWIs employed in Cyprus with an annual income exceeding €55,000 can benefit from a 50% personal income tax exemption for a period of 17 consecutive tax years (subject to conditions). This allows for an effective income tax rate on such employment income not exceeding 17.5%. Alternatively, if an individual’s employment income is below €55,000 per annum, they may qualify for a 20% income tax exemption on that income (up to a maximum exemption of €8,550 per annum) for 7 consecutive tax years (subject to conditions).
Additionally, remuneration earned by a Cyprus tax resident for services rendered to a non-tax resident employer outside Cyprus for more than 90 days is fully exempt from taxation in Cyprus.
Additional Income Tax Exemptions
It is noteworthy that dividend income and passive interest income are exempt from income tax in Cyprus, regardless of the individual’s tax residency status. Furthermore, profits arising from the disposal of titles (e.g. shares, bonds and other similar financial instruments) are also exempt from income tax, making Cyprus an attractive destination for HNWIs investing in these assets.
Non-Dom Status
A Cyprus tax resident categorized as non-domiciled for tax purposes (e.g. if their father’s domicile was not Cypriot at the time of their birth) is eligible for an exemption from Special Defence Contribution (SDC) on interest, dividend and rental income. The “non-dom” status can be maintained for up to 17 tax years, further enhancing Cyprus’ appeal to HNWIs.
Double Tax Treaties
Cyprus has established Double Tax Treaty agreements with over 60 countries, creating a favourable tax environment for its taxpayers. These treaties prevent double taxation by providing treaty tax exemptions or the right to claim tax credits.
Pensioners
Cyprus is also an excellent option for individuals considering relocation upon retirement. This demographic can benefit from tax exemptions on lump sums received as retirement gratuities, as well as a special tax regime on foreign pension income. Under this regime, individuals can opt to be taxed at a flat rate of 5% on foreign pensions exceeding €3,420.
It is important to note that the aforementioned tax regimes and exemptions may create obligations for Social Insurance (“SI”) and General Healthcare System (“GHS”) contributions. Therefore, both SI and GHS should be assessed when opting to establish tax residency in Cyprus.
Furthermore, it is also worth highlighting that the Cypriot tax system, as administered by the Ministry of Finance, does not impose estate duties, property taxes, wealth taxes, gift taxes or inheritance taxes, making Cyprus an even more attractive option for relocation.
Cyprus on the map of HNWIs as a modern life destination
In a world evolving rapidly and often unpredictably, the pursuit of stability, consistency and quality of life is no longer a privilege but a necessity. Cyprus, with its unique combination of tax flexibility, business dynamism and high standard of living, emerges as a destination that is not limited to returns but invests in substance. It is not merely a safe investment haven; it also constitutes a modern, stable and human-centred environment that allows people to plan with confidence, grow with consistency and thrive in every aspect of their lives, professionally, personally and as families.
*Michalis Karatzis, Director, Tax Services & Herodotos Hadjipavlou, Senior Manager, PAS, Tax Services, EY Cyprus
- This article first appeared in the 2025 edition of The Cyprus Journal of Wealth Management. Click here to view it. To view the full edition, click here
