Cyprus: A Private Wealth Law Overview

The Landscape in Cyprus

Cyprus, although a small country with a population of only around 1 million, has over the last few years been attracting high net worth individuals (HNWIs) who are looking to either relocate to another country for tax purposes or business reasons because of the unique features of the island and its offering.

In recent years, Cyprus has sought to attract even more HNWIs; such individuals have been re-assessing their priorities, usually because of tax reforms/changes in their current jurisdiction, and may favour the attractive offerings of Cyprus.

Headquartering in Cyprus

Cyprus recently implemented an action plan called the “Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus” and has also undertaken a significant tax reform with the aim of attracting HNWIs and their businesses, as well as talent.

Partly because of the foregoing, but also because of uncertainty in their jurisdictions (political or otherwise) and certain other advantages of Cyprus, a large number of companies in the financial services sector – including financial technology (fintech) businesses – have relocated to Cyprus. Such relocations are usually driven by tax and financial reasons, including benefits for the leadership teams and owners of such businesses. There are a number of ways that HNWIs relocating to Cyprus can also obtain Cypriot citizenship, provided that they satisfy certain conditions – something that a number of HNWIs have taken advantage of.

Impact of the Wars in Ukraine and the Middle East

Following the commencement of the wars in Ukraine and the Middle East, the imposition of sanctions and the current uncertainty in the UAE, a number of international companies – mostly in the technology and hospitality sectors – have sought to relocate, together with their employees and their families, to Cyprus to take advantage of all the benefits the country has to offer, including flexibility and stability. As a result, Cyprus, and more specifically the city of Limassol, has become a hub for such businesses, including fintech businesses, creating a very active and competitive business environment.

Trusts and Estate Planning

There are several beneficial succession laws in Cyprus that estates of individuals domiciled in Cyprus are disposed of in accordance with local legislation. While estate planning is usually undertaken through wills or trusts, there is no inheritance tax, wealth tax or gift tax in Cyprus. Setting up a trust in Cyprus can aid asset wealth protection as well as estate planning, as they can offer tax advantages, among other advantages.

The existence of the Cyprus International Trusts also has significant advantages for HNWIs, such as enhanced confidentiality, perpetual validity and additional asset protection.

Family Law Matters

Cyprus is also a jurisdiction of choice for family law matters, primarily because of its relatively straightforward procedures with regard to family law matters, including, inter alia, commencing divorce proceedings. The only requirement for such proceedings to commence in Cyprus is that one of the spouses has been living in the country for at least three months (even if the wedding ceremony did not take place in Cyprus). Another important advantage is that the marriage itself does not affect the independence of the estate of each spouse.

Tax: Non-Dom Scheme

One feature of the local regime that plenty of HNWIs have taken advantage of is the non-dom scheme, whereby an individual may enjoy non-dom status if he/she has not been a tax resident of Cyprus for a period of 20 years prior to 16 July 2015. The main benefit of the scheme is that there is no tax liability on income from interest and dividends from Cyprus or any other country. The main conditions are as follows:

• stay at least 60 full days in Cyprus during in each calendar year;
• rent/buy a house/flat in Cyprus; and
• demonstrate “economic interest in Cyprus”, as stipulated in the applicable law.

Given the recent changes in tax laws in the UK, it is anticipated that even more HNWIs will now select Cyprus.

Tax: Other Considerations

Some other key tax features that attract HNWIs and their businesses to Cyprus are as follows:

• one of the most attractive tax regimes in Europe (corporate tax rate is 15%), fully compliant with EU and OECD regulations;
• exemption of profits realised on disposal of securities, irrespective of whether the profits and gains are considered to be of a revenue or capital nature;
• no withholding taxes on dividends and interest paid to non-tax residents – the special defence contribution (SDC) rate applicable on dividends paid to Cyprus domiciled tax resident individuals is reduced from 17% to 5% for profits earned after 1 January 2026;
• no SDC on rental income;
• profits of a permanent establishment on a Cypriot tax resident company maintained abroad are generally exempt from tax in Cyprus;
• 100% exemption from personal income tax for remuneration earned from employment outside Cyprus for a period of more than 90 days (in aggregate) in a given tax year for a non-Cyprus tax resident employer/foreign permanent establishment of a Cyprus tax resident employer;
• the Cyprus IP box allows for a deductible notional expense, calculated as 80% multiplied by the profits from qualifying IP – only 20% of qualifying IP income (after costs) is taken into account for tax purposes, assuming that the relevant conditions are met.
• 50% exemption on remuneration for first employment, commencing as of 1 January 2022, in Cyprus with remuneration exceeding EUR55,000 per annum for individuals who were not a resident of Cyprus for a period of at least 15 consecutive tax years immediately prior to the commencement of their employment in Cyprus; and
• stamp duty has been abolished for documents signed after 1 January 2026.

Family Offices

In addition to all the benefits set out above, many HNWIs have sought to set up family offices in Cyprus for various reasons, including:

• highly skilled staff;
• it is easy to set up such offices, and it is possible to use different structures;
• owners of family offices can take advantage of the non-dom status and other tax advantages set out above; and
• foreign investors are not restricted with regard to the business they choose to conduct.

Conclusion

Cyprus benefits from a stable legal system and all EU law instruments. The legal system is based on the English common law system, and legal reforms have been implemented recently – including the adoption of new Civil Procedure Rules (similar to the English ones) and a three-tier court system, with a specialist commercial court hearing high-value commercial claims exclusively – all of which benefit HNWIs both from a business and a personal perspective.

All of the above, combined with the unique features of the island – ie, being an EU member situated at the crossroads of three continents, with a highly skilled and trained labour force and attractive laws for estate planning, trusts, etc – render Cyprus as a very attractive choice not only for living but also for conducting business for any HNWI.