Today, Cyprus is a favored destination for Israeli citizens due to convenient flight connections, its mild climate, a similar mindset and other benefits. They are also willing to make private and corporate investments in the country.
There’s a long history of bilateral relations as well as Israeli presence in Cyprus, circumstances which are driven by shared economic interests. For non-institutional investors, this is perceived to be an indicator that the Cypriot market is liquid and profitable with a great future.
Let’s examine in closer detail why this Mediterranean island attracts wealthy Israelis.
Cyprus is one of the most popular holiday destinations for residents of Israel. According to the Statistical Service of Cyprus (Cystat), Israelis constituted 11% of all tourists in 2022, which put them in second place after the British. Visitor numbers increase every year due to the geographical proximity of the two countries (it takes 40 minutes to get from Tel Aviv to Larnaca by plane), many direct flights, visa-free access, and the island’s milder climate.
Cyprus in the EU
Since 2004, Cyprus has been a member state of the European Union and therefore enjoys all the benefits of free trade and capital movement. Many Israelis consider the country to be a perfect place for business expansion and a point of entry to the European market. It is relatively easy for them to open businesses there, to become tax residents, and to gain access to a special tax regime.
In addition, investment opportunities in the Cypriot real estate market are more attractive compared to those available in Israel. Property is still more competitively priced on the island and can be rented to tourists and expats for the larger part of the year (many IT companies relocate employees with families to Cyprus).
Safety is an additional factor that makes Cyprus a good place to relax and live. Although still ongoing, a long domestic conflict is now dormant. In addition, the country does not conduct military operations and its residents do not suffer from terror attacks or the bitter consequences of war. Cyprus now has one of the lowest crime rates in the EU.
Education and healthcare
The countries cooperate in the fields of education and healthcare. Reputed Israeli medical companies have settled on the island, while Israeli students are attracted by the American and British qualifications offered by Cypriot schools (proximity and affordability also play a role).
An attractive taxation system
The government of Cyprus attracts foreign investment with a moderate fiscal policy for physical and legal persons.
What are the benefits for wealthy Israelis?
New tax residence
Individuals who spend more than 183 days on the national territory are considered tax residents of Cyprus (183-day rule).
In July 2017, the parliament of Cyprus extended the definition of tax residency to include those who spend at least 60 days a year in Cyprus (60-day rule) and meet the following requirements:
- They do not spend more than 183 days a year in another country.
- They are not tax residents of another country.
- They spend at least 60 days in a calendar year in Cyprus.
- They conduct business (commercial activities) in Cyprus, and/or are employed in the public or private sector, and/or hold a management position in a company that is a Cyprus tax resident during a tax year.
- They own or rent residential property.
Having close ties with Cyprus and business interests — including income earned in the country — are factors that play a key role in establishing an individual’s tax status.
A progressive rate, which can reach 35%, applies to the global income of tax residents of Cyprus. Tax residents of other jurisdictions are only taxed on income from sources on Cypriot territory.
There are no property, wealth, inheritance, and gift taxes.
Non-domicile tax status
Cyprus offers a special non-domiciled tax resident (non-dom) status to those who live on the island for at least 60 days of a tax year and have close personal connections with the country but do not plan to make Cyprus their permanent place of residence.
After relocation, foreigners who choose this special tax status automatically obtain tax benefits and privileges for 17 years.
Those who qualify for the non-dom status are also exempt from interest and dividend taxes, plus capital gains tax (except for capital gains from property sales in Cyprus). They are also not required to pay the Special Tax Contribution for Defence Purposes.
If an Israeli citizen has property in Cyprus and spends a couple of months a year there, this can be an especially attractive option.
Permanent residency without permanent stay
Investors and their family members can become permanent residents of Cyprus. The holders of this status are required to visit the country once during a two-year period, but they do not have to reside there.
To obtain a permanent residence permit in Cyprus, an applicant may choose one of the following options:
- Buy residential property on the primary market for at least EUR 300,000 + VAT. The property can be purchased by a legal entity registered in the name of the main applicant or their spouse provided they are the sole shareholders.
- Buy one or two non-residential properties of any type (offices, retail spaces, hotels, or a combination thereof) with a total market value of at least EUR 300,000.
- Invest EUR 300,000 in a new company’s share capital, or increase the share capital to EUR 300,000 of an existing company in Cyprus. In both cases, the company should be registered to operate in the country and employ at least five people.
- Invest at least EUR 300,000 in a private investment fund in Cyprus (AIF, AIFLNP, RAIF, etc.)
Why do wealthy Israeli citizens need to acquire permanent residence status in Cyprus? It is a way to diversify one’s economic and legal interests; having citizenship or a residence permit for one country is not always sufficient in the current world we live in. Obtaining a new residence permit, followed by citizenship facilitates international travel, doing business, and educating children; it may also reduce the tax burden on individuals and businesses. In the case of Cyprus, individuals are not required to live in the country to maintain their residence status; they need only visit the island once in a two-year period. The residence permit is granted to the entire family and can be arranged remotely once biometric data has been submitted in person.
It is a win-win situation: Cyprus is an open country that is constantly searching for investors and mutually beneficial cooperation, while the Israelis are willing to make significant investments.
If you are a citizen of Israel and you are thinking about your future, Cyprus can be a good place to live, do business, study, or relocate with your family.