CYPRUS Law and Practice Contributed by: Stella Strati, Patrikios Legal
Innovative SMEs A qualifying person that makes an investment in an innovative SME (as defined by the Cyprus Income Tax Law) may deduct the costs of the investment from the taxable income subject to limitations imposed by the law, such as: • the tax deduction is limited to 50% of the investor’s taxable income in the year in which the investment is made; • the deductible amount cannot be more than EUR150,000 within a tax year; and • the investor must retain the relevant investment in the innovative SME for at least three years. This incentive is available until 31 December 2026. Start-Up Visa On 19 December 2024, the Deputy Ministry of Research and Digital Policy announced the approval of a revised start-up visa scheme, which is applicable as of 1 January 2025. This scheme enables owners and senior executives from third countries to enter, reside and work in Cyprus, for the purposes of estab - lishing a new start-up or transferring an existing start- up into Cyprus. 2.4 Loss Relief On a company level, tax-adjusted losses can be car - ried forward and be set off against tax-adjusted profits for the next seven years. Losses cannot be carried back. On a group level (subject to the existence of cer - tain criteria and the formation of a tax group), group members may surrender losses from one loss-making member to another profitable one. A direct or indirect holding of at least 75% for the entire tax year is nec - essary for a company to be considered forming part of a tax group. As of 2015, the interposition of companies established in the EU – or in countries that either have a DTT with Cyprus or have signed the OECD terms for exchange of information – can be taken into consideration for the calculation of an indirect holding. Furthermore, group relief is available between companies established in EU member states, provided that the EU subsidiary
qualifying ships and that dividends distributed out of companies under the TTS are not subject to the SDC. Incentives for Individuals Special incentives are also provided to individuals. A tax incentive was introduced in 2022 and amended on 30 June 2023, that provides that a natural person employed in Cyprus (as of 1 January 2022) enjoys a tax exemption of 50% on salaries for a period of 17 years from the date of employment, irrespective of whether the individual changed employers dur - ing the relevant 17-year period – provided they have previously not been resident in Cyprus for a period of at least 15 consecutive years and earn more than EUR55,000 per year. Previously (ie, before the June 2023 amendment), the exemption was only granted for the first employment of the individual in Cyprus. Furthermore, individuals who first take up employment in Cyprus after 26 July 2022, with annual emoluments lower than EUR55,000, will be eligible for a 20% or EUR8,550 exemption (whichever is lower) for a maxi - mum period of seven years. An individual must have been employed abroad for at least three consecutive years prior to the commencement of employment in Cyprus in order to claim this exemption, which can be claimed from the year after taking up employment In addition, individuals who are not tax resident in Cyprus or individuals who are tax resident but non- domiciled in Cyprus are not subject to the SDC on dividends or interest. Non-dom status, once obtained, lasts for 17 years. However, a new provision was intro - duced in the tax legislation (applicable as of 1 January 2026) which states that a non-dom individual whose non-dom status has expired maintains this domicile status up until the completion of 20 years. In addi - tion, an individual whose non-dom status has expired may choose to be subject to an alternative method of tax for a period of five consecutive years by paying an amount of SDC of EUR250,000 in one instalment, regardless of the amount of their dividend or interest income. in Cyprus. Non-Doms
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