Tax Optimization and Tax Planning in Cyprus

Why tax planning is becoming increasingly relevant

If you live or conduct business between several countries, receive dividends, investment income, or are planning relocation, the tax burden almost always becomes more complex than it seems.

In practice, it looks like this:

• an entrepreneur relocates but continues paying taxes in the former country;
• an investor receives dividends and does not understand where they should be declared;
• a bank requests a tax residency certificate and proof of source of funds;
• after 2–3 years, the tax authority of the former country sends an inquiry.

That is why tax planning is part of a financial strategy rather than a formality. Today, tax minimization is not about avoiding obligations but about legally reducing taxes through proper structuring of personal tax status.

Mistakes when changing tax residency

We often see the following scenario: a person relocates, opens a company, obtains tax residency in another country, and after 1–2 years discovers that the previous country still considers them a tax resident.

The result:

• double taxation;
• difficulties with banks;
• unexpected additional tax assessments;
• lost money and time.

Tax planning is always an individual strategy. But most situations come down to three tasks: avoiding dual tax residency; legally reducing the tax burden; creating a structure understandable for banks and tax authorities.

The main idea is simple: a proper tax status and income structure allow you to pay less tax within the EU.

Why Cyprus is considered one of the best countries for tax planning in the EU

The Cypriot tax system is often regarded as one of the best for implementing tax planning within EU legislation and international compliance standards. This is due to a combination of factors: a competitive tax rate, the Non-Dom regime for tax residents, a wide network of double taxation treaties, flexible tax residency rules, and a legal system based on European and English legal principles.

Tax minimization in Cyprus

1. Corporate tax — competitive EU rate

The corporate tax rate in Cyprus is 15% on net income rather than total turnover, remaining one of the most competitive among EU countries. For comparison, Spain is around 25%, Italy 27%, and Portugal up to 31%.

2. Non-Dom regime

This is the key element of tax planning. If a person becomes a tax resident of Cyprus while maintaining non-dom status, they receive significant advantages: dividends and interest without additional tax.

What does this mean in practice?

If an investor receives, for example:

• dividends from foreign companies;
• income from international investment portfolios;
• payments from holding structures —

taxation may be significantly lower than in most European countries.

This is why the Non-Dom regime is considered one of the strongest tax minimization tools in the EU.

3. Flexible tax residency

Cyprus allows obtaining tax residency by staying more than 183 days per year or under the 60-day rule (subject to conditions).

Why this is important for entrepreneurs and investors:

• no need to live on the island most of the year;
• ability to maintain an international lifestyle;
• tax status is officially and transparently established.

In practice, this means control over your tax status without full attachment to one country.

4. Income from sale of shares and investments

Another practical point:

• the sale of shares and securities is generally exempt from capital gains tax;
• exception — transactions related to real estate located in Cyprus.

5. Incentives for specialists and founders

Tax incentives for foreign specialists can significantly reduce the overall tax burden when relocating a business or team. For example, a 50% income tax exemption if annual income exceeds €55,000.

6. No inheritance and gift tax

Transfer of assets through inheritance or gifts is not subject to a separate tax, making Cyprus a convenient jurisdiction for long-term family asset planning.

7. No annual property tax

For property owners, this means more predictable expenses and long-term savings.

Tax planning in Cyprus is often considered by:

• individuals with international income sources;
• investors with dividend income;
• specialists planning relocation to the EU;
• families interested in long-term financial planning.

If income comes from different countries, an individual tax strategy becomes practically essential.

What is important to know about tax minimization

People often look for ready-made ways to “reduce taxes,” but international rules take into account:

• country of actual residence;
• income sources;
• center of vital interests;
• asset ownership structures;
• tax treaties between countries.

Therefore, effective tax reduction is always individual. What works for one person may be risky for another.

How the tax planning process in Cyprus works

Practice shows that tax minimization is impossible without a comprehensive approach. A tax strategy is always connected not only with taxes but also with legal structure, immigration status, banking requirements, and international compliance rules.

Therefore, professional tax planning in Cyprus includes several stages:

1. Analysis of current tax status and income structure;
2. Compliance review and tax risk assessment;
3. Selection of the optimal tax residency model and tax optimization strategy;
4. Preparation for changing tax residency and documentation setup;
5. Comprehensive support and regular tax review.

Feod Group services

Feod Group has been working in international law since 1992 and has been supporting clients in Cyprus since 2007, combining the expertise of licensed Cypriot lawyers, international attorneys, and experts.

We offer not separate services but comprehensive support, including:

• tax planning and tax residency analysis;
• development of legal tax minimization strategies;
• legal structuring of assets and international income;
• immigration solutions and relocation support;
• corporate services and support of international structures;
• legal assistance in dealings with banks and compliance procedures.

Take the first step — get a personal tax consultation

If you:

• plan to relocate to Cyprus;
• receive international income;
• want to legally reduce your tax burden;
• are unsure about your current tax status —

a personal consultation will help you see the full picture before making decisions.

Online consultations | Office in Larnaca