By
February 26, 2025
Tax on Forex Trading Profits in Cyprus
Cyprus is a well-known hub for forex trading and brokerage firms due to its favorable regulatory environment and attractive tax policies. The country’s business-friendly tax regime makes it an appealing destination for both individual forex traders and companies operating in the financial markets. Here’s a breakdown of how forex trading profits are taxed in Cyprus.
Yes, forex trading profits are subject to taxation in Cyprus, but the tax treatment varies depending on whether you are an individual trader or a corporate entity running a forex business.
For individual traders, forex trading is generally considered an investment activity, and profits may be subject to capital gains tax or income tax, depending on the trader's classification.
For forex companies and professional traders, businesses engaged in forex trading are taxed under Cyprus corporate tax regulations.
In Cyprus, capital gains tax applies only to profits from the sale of immovable property, such as real estate, located in the country. This means that forex trading profits are not subject to capital gains tax, making Cyprus an attractive location for investors.
If an individual trader engages in forex trading frequently and earns substantial profits, tax authorities may classify forex trading as a professional activity. In such cases, profits from forex trading will be taxed as personal income.
Cyprus has a progressive income tax system, where the first €19,500 of income is tax-free. Beyond this threshold, income tax rates range from 20% to 35%, depending on the total income earned.
If forex trading is considered a primary source of income, traders may also be required to register for social insurance contributions, which amount to approximately 15.6% of taxable income.
Cyprus is home to many forex brokers and trading firms due to its low corporate tax rates and favorable business regulations. If a trader operates a forex business, profits are subject to corporate tax rather than personal income tax.
The corporate tax rate in Cyprus is 12.5%, one of the lowest in the European Union. Additionally, profits distributed as dividends are generally not subject to withholding tax for non-residents, though Cyprus tax residents may be subject to a 17% Special Defence Contribution (SDC) on dividend income.
Forex trading activities, including CFD trading, are VAT-exempt in Cyprus, as they fall under financial services.
Cyprus offers several tax advantages for forex traders, making it a preferred jurisdiction for many professionals in the financial industry. These benefits include:
If forex trading profits qualify as taxable income, individual traders must register for taxation and obtain a Tax Identification Number (TIN) from the Cyprus Tax Department. An annual tax return must be filed, usually before July 31st each year. If total income exceeds €19,500, income tax must be paid based on the applicable tax brackets.
For forex trading companies, corporate taxes must be reported annually, and businesses must maintain detailed financial records of their trading activities.
Cyprus has over 65 double taxation treaties with countries worldwide, preventing traders from being taxed twice on the same income. If a trader resides in Cyprus but earns forex trading profits in another country, these agreements can help reduce tax liability.
Some of the key countries Cyprus has double taxation treaties with include the United Kingdom, Germany, France, Italy, the Netherlands, and Spain.
For non-resident forex traders, tax obligations depend on their primary country of residence and the tax treaty between that country and Cyprus.
Forex traders in Cyprus benefit from a favorable tax regime. Individual traders do not pay capital gains tax on forex trading profits, and personal income tax applies only if forex trading is classified as a primary business activity. The first €19,500 of income is tax-free, with higher earnings subject to progressive tax rates.
For forex companies, the 12.5% corporate tax rate makes Cyprus an attractive destination for financial businesses. There is no VAT on forex trading, and non-residents do not pay withholding tax on dividends.
To ensure compliance with Cyprus tax laws, forex traders should consult with a local tax advisor or accountant for personalized tax planning.
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