Cyprus is a popular destination for foreign nationals – not only with British expatriates looking for a mild climate, low living costs and advantageous tax structures.
The island provides a typically laid-back Mediterranean lifestyle, high schooling standards and 320 days of annual sunshine alongside an internationally focused business sector.
With English widely spoken across North and South Cyprus, the country attracts professionals and families from across Europe, but understanding the true cost of living and tax implications are essential to plan a smooth, financially secure relocation.
Cost of Living in Cyprus
The island is divided into two republics – the Republic of Cyprus in the South and the Turkish Republic of Northern Cyprus in the North. There is a zone called the Green Line, created by the UN, which runs between the countries, although EU citizens and foreign nationals with valid visas can travel freely across.
For the purposes of this article, we will focus on the Republic of Cyprus, which makes up the southern area of the island and is an EU nation.
There are several reasons this region is favoured by global expatriates:
- Multiple double tax treaties with countries, including the UK.
- More advanced infrastructure and developed amenities.
- A more dynamic, prosperous economy and greater presence of multinational businesses.
Living costs are similar to other countries in southern Europe and considerably more affordable than Britain, with low prices even on coastal properties and inexpensive local shopping.
Comparing Costs of Living in Cyprus vs the UK
Nicosia, the capital, is the most expensive place to live, unsurprisingly as the largest city, although Cyprus is considered less costly than the UK.
Numbeo collates average national living costs and reports that in Cyprus:
- Consumer goods cost 10.08% less than in the UK.
- Rental properties are 16.58% less expensive.
- Restaurant charges in Cyprus are 17.78% lower.
- Groceries cost 7.37% less.
Of course, the other considerations that will impact your budget depend on whether you are working or retired and whether you have private healthcare coverage.
Employees and pensioners normally contribute 2.65% of their income to the Cypriot National Health Insurance System, with employers adding a 2.9% contribution. Deductions are capped on incomes over €180,000, and participants can access standard medical services with co-payments of up to €300 per year for any treatments required.
Visas and Residency Permits in Cyprus
EU citizens can relocate to Cyprus with minimal paperwork, but UK nationals and those from other non-EU countries will need a visa or permit to live and work in the country.
Travellers and tourists can visit for 90 days without a visa but will need to undergo a fairly complex residency application for an extended or permanent stay – this normally means applying for a MUK1 temporary residence permit and then proceeding with a longer-term application.
The Cypriot citizenship by investment scheme was scrapped in 2020 following EC criticisms and allegations of potential tax evasion. Still, there is the option of applying for residency by investment as an alternative.
Eligibility requirements include:
- Buying a new-build property for €300,000 or above, plus applicable taxes.
- Transferring at least €30,000 to a Cypriot bank for three years.
- Providing evidence of an annual income from outside of Cyprus of €30,000 per year, plus €5,000 per additional visa applicant and €8,000 for each accompanying parent.
- Verifying that the applicant will not be employed in Cyprus (although they can own a Cypriot business and receive dividends).
- Having a clean criminal record.
- Visiting Cyprus within one year of receiving a permit to submit biometric data.
Qualifying property investments can include several smaller properties, a mixture of commercial and residential properties or a home bought to rent out – but it must be a new build purchased from a developer.
Please download your complimentary copy of our Cyprus Residency Guide for further information.
Taxes for Expats Living in Cyprus
The Cypriot taxation system has a personal allowance, similar to the UK structure, set at €19,500, with income tax payable at a maximum of 35% on income above €60,000.
Income tax works on bands and is currently payable as follows:
- Up to €19,500 – 0%
- €19,500 – €28,000 – 20%
- €28,000 – €36,300 – 25%
- €36,300 – €60,000 – 30%
- €60,000 and above – 35%
Expats who own a business normally pay 12.5% Corporation Tax on company profits plus a 2.5% tax on any royalties linked to Intellectual Property located in Cyprus.
Cypriot Pension Tax
Pensioners can choose how their retirement income is treated:
- Option one: fixed tax rate of 5% on all pension income over €3,420.
- Option two: income tax according to the relevant tax band tier.
Choosing wisely could significantly impact your net income, and retirees can switch between tax treatments every year if they wish to, which affects the amount of tax-free income they can earn.
The below table illustrates how these two tax options compare:
|Tax Treatment One
|Tax Treatment Two
Cyprus has a specific tax status called non-domiciled tax residency, which applies to foreign nationals who relocate to the country and become tax residents – provided they have not previously been tax residents in the last 20 years.
This status allows expats to be exempt from capital gains tax and ineligible for social security defence contributions on their income. If you live in Cyprus for more than 183 days per year and qualify as a non-domiciled tax resident, bank interest, and share dividends also become tax-free.
We recommend you seek financial advice if you need assistance selecting the optimal tax treatment or determining whether you qualify for this tax status.
Guidance on Calculating the Cost of Living in Cyprus
As we have seen, the costs of living in Cyprus do not solely relate to average expenditure on utilities, groceries, and accommodation but are affected by tax bands, income sources, your visa category, and where your earnings originate.
For more information about the average costs of living in Cyprus, investing in Cypriot property or registering for the correct tax rates, please contact Chase Buchanan for independent professional support.