Cyprus Tax System Since 1961 Cyprus has been an independent country after the United Kingdom permitted it to separate and form a sovereign state. From the time of its independence Cyprus has become a developed commonwealth with a stable and strong economy and has become part of the European Union with the adoption of the Euro as its currency. After some years of violence between the Greek and Turkish residents of the island, Cyprus has been split into two entities since 1974. These two entities consist of the Greek Cypriots in the South and the Turkish Cypriots in the North. However, Cyprus has claimed sovereignty on most of the island with the Northern part of Cyprus only being recognised as a separate entity by Turkey. The economic infrastructure of Cyprus is very developed and progressive. This makes it one of the European Unions above average economies. Cyprus’ economy is based very much on tourism and international business and investment. One of the reasons as to why foreign business and investment is so popular in Cyprus is due to the Tax and corporate codes. The law in Cyprus states that only those companies that are managed and controlled from within Cyprus are liable for taxation. For those companies that are not managed and controlled within Cyprus need to provide certification of payments within its own country of residence to the authorities. This results in the company not being liable for taxation in Cyprus as the Cyprus policy states that foreign companies are only taxed on those revenues that are produced inside of Cyprus. Additionally the tax rates in Cyprus are very low and there are many exemptions that exist. Cypriot resident companies are obligated to pay a 3-15% contribution to defence tax that foreign resident companies in Cyprus do not have to pay. To test the residency of an individual is simple. If a person is going to be in Cyprus for at least 183 years out of a year they will be considered a resident. In a similar way to the method in which companies are taxed, a resident of Cyprus is subject for both local and international income. A foreign resident is only subject to tax on local income. The income tax that is paid in Cyprus is in accordance to the following:- Salary under 10,000 - 0% income tax Salary 10,001 – 15,000 - 20% income tax Salary 15,001 – 20,000 - 25% income tax Salary above 20,000 - 30% income tax