There are also significant social security contributions that must be considered:

Employer contributions:

• Social insurance: 8.3 %

• Redundancy fund: 1.2 %

• Social cohesion fund: 2 %

• Human resources development fund: 0.5 %

• Central holiday fund: 8 %

Employee contributions:

• Social insurance: 8.3 %

• Self-employed contribution (if applicable): 15.6 %

The National Health Insurance System is a universal healthcare system that is financed through a set of contributions. The most significant for individuals and private companies are:

• 2.65 % for employees

• 2.9 % for employers

• 4 % for self-employed individuals

• 2.65 % for individuals earning rental, interest, and/or dividend income

The earnings are deducted from the entire earnings of the individual up to €180k per year.

The Special Defense Contribution (SDC), also known as the Defense tax, applies on determinate types of income such as:

• Dividend income (17 %)

• Passive interest income (30 %)

• Rental income (2.25 %)

This may seem in the low-end of the OECD taxes, but nothing too beneficial. Here is when it gets better. An expat that relocates to Cyprus is eligible to one of these tax exemptions on employment income:

• 50 % of the remuneration from employment in Cyprus for ten years if the income exceeds €100k per year. The individual cannot be a Cypriot tax resident for at least three of the last five years or the tax year immediately prior before his or her employment.

• 20 % of the remuneration or €8,550 (the lower of the two) from employment in Cyprus by an individual that resided outside Cyprus before starting to work in Cyprus for five years.

Likewise, any income from overseas employment to a non-resident employer or to an overseas establishment of a resident employer for at least 90 days is fully exempt from income tax.

There are also tax incentives for overseas fund managers: there is a special tax rate of 8 % on variable employment remunerations for 10 years for such individuals, as long as their liabilities are more than €10k.

Individuals that qualify for the non-dom status are exempt from tax on dividends and interests. Likewise, Cyprus has double taxation treaties that provide hefty reductions or even exemptions from withholding taxes on dividends, interests, royalties, and pensions of foreign sources.

One of the most significant advantages is the fact that any foreign-sourced dividends are entirely tax-free. That means that capital earnings coming from foreign sources can be freely moved and kept and distributed internationally without taxes. Some other countries, such as the UK and Ireland, also offer a non-dom program, but in those cases, it is generally related to complex tax regulations that provide no benefits. That is not the case in Cyprus.

These conditions apply for both individuals with non-dom status and companies registered in Cyprus.

Now, the corporate tax in Cyprus is a mere 12.5 % with a 2.5 % tax for licenses and similar income. A company is considered a Cypriot tax resident if its effectively managed and controlled from Cyprus.

Offshore companies’ payments are tax-deductible for Cypriot companies as business expenses. Likewise, if the company in Cyprus owns shares of another company, all dividends are tax-free. Income from securities and most investments are generally tax-free.

The business address of a company can be registered in the private residency of the major shareholder. This is beneficial for non-dom individuals because renting costs can count as business expenses.

Aside from this wonderful frame, Cyprus offers some tax benefits to certain types of companies. For example, holding companies can be redomiciled out of Cyprus, if the other country allows that. Holding companies have tax exemptions on disposal and trading of securities (shares, debentures, bonds, options on titles, and many others of companies in Cyprus or abroad).

There is a 20 % capital gains tax that applies only to:

• Immovable property in Cyprus

• Shares in companies whose property consists of immovable property in the country

• Shares of companies that partake in a company that owns immovable property in Cyprus and at least 50 % of the market value of the shares comes from the immovable property

Dividend income received from Cyprus tax resident companies, from foreign companies, or from overseas, permanently established, Cyprus holding companies is fully exempt from corporate tax. The only exemption is if the dividends are deductible for determining foreign taxes of the income of the company that pays the dividend, in which case, it is subject to the 12.5 % corporate tax. Likewise, for foreign dividends, the exemption will not apply if these two conditions hold:

• More than 50 % of the activities of the overseas paying company come from passive income.

• The tax burden of the foreign company income is 50 % lower than the Cyprus corporate tax rate.

Dividends and interests paid by a Cyprus resident company to non-resident shareholders and royalties paid from Cyprus (excepting intellectual property used in Cyprus, in which case there is a 10 % withholding tax) are not subject to withholding tax. Dividends received from non-resident companies are exempt from the SCD (also known as Defense tax) under certain conditions.

• Re-organization, such as merging, demerging, transfer, or exchange of assets between Cyprus resident companies and/or non-residents are fully tax-exempt.

• Company losses can be carried to the following year and set off against future profits. This process is allowed for five years.

• There are no estate duties, wealth tax, gift tax, or inheritance tax