Existing tax benefits in Cyprus
New tax benefits introduced by government action plan


Cyprus is a long-established international business centre and, through various initiatives, is now positioning itself as a prime European entrepreneurial hub.

More specifically, Cyprus is aiming to expand its tech space and become the "tech island" of the Mediterranean. For this reason, and in order to attract foreign investment, the country will be offering a range of incentives to attract companies and persuade those based on the island to expand their activities, as it seeks to cater to the requirements of a technologically driven post-covid-19 world.

Existing tax benefits in Cyprus

Cyprus already offers a host of different benefits both for individuals and businesses, including:

  • expatriate tax exemption, subject to qualifying criteria, on either 20% or 50% of earned income (depending on salary level);
  • relatively low-income-tax rates; and
  • a corporate tax rate of 12.5%.

There are no succession taxes and no capital gains taxations (except for specific cases).

The IP box regime, which allows for an 80% tax deduction under the nexus approach, could grant investors a potential effective tax rate of just 2.5%.

Besides having a favourable tax environment, Cyprus also has reasonable immigration rules and low living costs. In addition, Cyprus is both a member of the European Union and strategically located between three continents – a unique, double advantage for individuals and for businesses.

New tax benefits introduced by government action plan

To boost the island's new investment drive, the government recently released an action plan(1) that vows to foster a business-friendly environment. The action plan includes:

  • taxation initiatives such as:
    • expansion of expatriate relief;
    • increased tax deduction for research and development costs; and
    • extension of tax exemption for investment in innovative companies; and
  • procedural optimisation initiatives:
    • the transformation of the fast-track business activation mechanisms to business facilitation units; and
    • the simplification and acceleration of the process that grants work permits.


In addition to the above points, there are numerous other actions that have been planned.

During the past decade, several initiatives have been observed, including corporate migrations that feature:

  • several well-known companies that have opted to be headquartered in Cyprus;
  • joint venture initiatives promoting Cyprus as a regional energy hub;
  • merger and acquisition transactions; and
  • other significant deals.

It is important that employers and investors examine the action plan to see how the reforms – which are expected to come into force in early 2022 following the enactment of relevant legislation – could benefit them and their businesses as Cyprus reinvents and establishes itself as an innovation-friendly jurisdiction.

For further information on this topic please contact Fabian Cabeza, Theodora Alexandrou or Maria Aristidou at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email ([email protected], [email protected] or [email protected]). The Elias Neocleous & Co LLC website can be accessed at


(1) Available only in Greek.