Cyprus is one of the most tax-friendly locations in the European Union, and on 1 January 2026 the most comprehensive tax reform in over a decade came into force. The tax-free threshold rises, the brackets widen, the corporate tax rate increases, and several tax residency rules have been simplified.
This guide explains how Cyprus taxation works for people relocating from Germany and beyond: how the income tax system is structured, when you count as tax resident, what Non-Dom status, corporate tax, and capital gains mean, and where the key differences from Germany lie. All figures reflect the 2026 legal position, with sources at the end.
Key facts at a glance
| Item | 2026 figure |
|---|---|
| Tax-free threshold (income tax) | €22,000 |
| Top marginal rate | 35% above €72,000 |
| Corporate income tax | 15% |
| SDC on dividends (domiciled individuals) | 5% (profits from 2026) |
| Non-Dom: dividends and interest | 0%, up to 17 years |
| Capital gains tax | 20%, Cyprus immovable property only |
| Wealth tax / inheritance tax | none |
| GHS (GESY) contribution (employees) | 2.65% |
Source: PwC, Cyprus Tax Summaries and the Tax Department of the Republic of Cyprus.
Income tax: progressive with a high threshold
Cyprus taxes the income of individuals progressively. That means your entire income is not taxed at the top rate; each band only captures the part of your income that falls within its range. A Cyprus tax resident is in principle taxed on worldwide income, although certain income such as dividends and interest is excluded from income tax.
Under the 2026 reform, the following bands apply:
| Chargeable income | Tax rate |
|---|---|
| €0 – €22,000 | 0% |
| €22,001 – €32,000 | 20% |
| €32,001 – €42,000 | 25% |
| €42,001 – €72,000 | 30% |
| over €72,000 | 35% |
The raised threshold of €22,000 provides meaningful relief, especially for middle incomes. For example, on a chargeable annual income of €40,000, the first €22,000 is tax-free, the next €10,000 is taxed at 20 percent, and the remaining €8,000 at 25 percent. The effective burden is well below the German level on comparable income.
Tax residency: the 183-day and 60-day rules
Whether you pay tax in Cyprus depends on tax residency. There are two routes, and only one of them needs to be met.
The 183-day rule
You are tax resident if you are physically present in Cyprus for more than 183 days in a calendar year (1 January to 31 December). This rule is straightforward but assumes a clear centre of life on the island.
The 60-day rule
For internationally mobile entrepreneurs, the 60-day rule is often more practical. You qualify as resident if, in a calendar year, you meet all of the following:
- at least 60 days of presence in Cyprus,
- no stay of more than 183 days in any single other country,
- an economic link to Cyprus through a business activity, employment, or a directorship in a Cyprus company,
- a permanent home in Cyprus, rented or owned.
One important point changed in 2026: until the end of 2025 you additionally had to not be tax resident in any other state. That fifth condition has been removed. You can now use the 60-day rule even if you are considered tax resident in another country. In practice you should review German tax law and the double taxation treaty carefully, as German exit taxation and the question of your centre of life remain relevant.
If you build the economic link through your own company, the details are in the Cyprus company formation 2026 guide; the advice and execution are handled by our company formation team.
Non-Dom status: tax-free dividends and interest
Cyprus distinguishes between tax residency and domicile. An individual who is resident in Cyprus but not domiciled there counts as a Non-Dom and enjoys substantial benefits. You are generally treated as not domiciled if you have no Cyprus domicile of origin and have been tax resident in Cyprus for fewer than 17 of the past 20 years.
The central benefit: Non-Doms are exempt from the Special Defence Contribution (SDC) on worldwide dividends and passive interest income, for up to 17 years. Income tax also does not capture these earnings. Dividends from a Cyprus or foreign company therefore flow in effectively tax-free.
For domiciled individuals, the SDC on dividends was cut sharply under the reform – from 17 to 5 percent for profits earned from 2026 onward. Dividends from older profits keep the 17 percent rate until the end of 2031. For how Non-Dom status is applied for and what matters in terms of substance, see the detailed Non-Dom status in Cyprus guide.
Corporate tax and the Cyprus Limited
The corporate tax rate was raised in 2026 from 12.5 to 15 percent, following the OECD global minimum rate. Despite the increase, Cyprus remains one of the EU's most competitive business locations, with a broad network of double taxation treaties and tax-free distributions to Non-Dom shareholders.
For many relocators, the combination of a Cyprus Limited and Non-Dom status is the core model: the company pays 15 percent on its profits, and the shareholder receives the distributions as a tax-free dividend. For the steps involved in incorporation and the ongoing obligations, see the Cyprus Limited 2026 guide.
Capital gains, property, and other taxes
Cyprus taxes capital gains very lightly. The key points:
- Capital gains tax: 20 percent, but only on gains from the sale of immovable property located in Cyprus (or shares in companies holding such property). Gains from the sale of securities such as shares are tax-free. The reform raised the lifetime exemptions: €30,000 on general disposals, €50,000 on agricultural land, and €150,000 on the sale of a primary residence.
- Rental income: income from Cyprus property is subject to income tax, with a flat-rate cost deduction reducing the taxable base.
- No wealth tax and no inheritance tax: Cyprus levies neither an ongoing wealth tax nor an inheritance or gift tax.
If you are considering buying a property, you will find practical guidance and market information in our real estate in Cyprus section.
Healthcare contributions (GESY)
Beyond income tax, there is the contribution to the General Healthcare System (GESY). Employees pay 2.65 percent of their income, while employers and the self-employed pay their own rates. The contribution is levied on various types of income and is capped. In return, you gain access to the public healthcare system. For how GESY works, what it covers, and when private cover makes sense, see the health insurance in Cyprus 2026 guide.
Special regimes for newcomers and pensioners
Two incentives are especially relevant for new arrivals:
- 50 percent exemption for high earners: anyone taking up first employment in Cyprus with an annual salary above €55,000, who was not tax resident in the prior years, can exempt half of their employment income for up to 17 years.
- 5 percent flat rate on foreign pensions: recipients of a foreign pension may elect each year to be taxed either at the normal progressive rates or at a flat 5 percent on the portion of the pension exceeding €5,000.
For retirees in particular, this opens attractive planning options. The full overview for this group is in Moving to Cyprus as a pensioner.
Cyprus and Germany compared
The appeal of Cyprus lies less in individual rates than in the overall picture. In Germany, the top rate of 42 percent applies much earlier, alongside the solidarity surcharge, church tax, and the 25 percent flat tax on capital income. Cyprus forgoes wealth and inheritance taxes, exempts Non-Doms from dividend and interest taxation, and combines this with full EU membership.
That said, leaving Germany is not automatic. German exit taxation, the question of your tax centre of life, and the double taxation treaty between Germany and Cyprus all have to be handled carefully. Individual advice on both sides is essential. If you are planning the move in principle, the organisational steps and costs are set out in Moving to Cyprus: requirements and costs 2026; to gauge your ongoing expenses, the cost of living guide for Cyprus 2026 helps.
Frequently asked questions
What is the tax-free threshold in Cyprus in 2026?
Since 1 January 2026, the first €22,000 of annual income is tax-free. Only above that do the progressive rates of 20 to 35 percent apply.
Are 60 days of presence enough for tax residency?
Yes, provided you also spend no more than 183 days in any other country, have an economic link to Cyprus, and maintain a permanent home there. The former condition of not being resident in any other state was removed in 2026.
What is the corporate tax rate?
It is 15 percent as of 2026, still among the lowest in the EU.
Are share gains tax-free in Cyprus?
Yes. Gains from the sale of securities such as shares are not subject to capital gains tax in Cyprus. The 20 percent capital gains tax applies only to Cyprus immovable property.
Do I have to tax my German income in Cyprus?
As a tax resident you are in principle taxed on worldwide income in Cyprus, with dividends and interest excluded for Non-Doms. Which income is taxed where is governed by the double taxation treaty between Germany and Cyprus.
Sources
- PwC, Cyprus – Taxes on personal income (2026 bands, tax residency)
- PwC, Cyprus – Income determination (special regimes, exemptions)
- Tax Department of the Republic of Cyprus (official tax administration)
This article is for general information and does not replace individual tax advice. For your personal situation, we recommend getting in contact with our team.
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