Background: When and Why Were Cyprus Exit Taxes
Introduced
Exit taxation rules were introduced in Cyprus on 31 December
2019 through Law N. 116(I)/2019, aligning with the EU Anti-Tax
Avoidance Directive (ATAD I & II). These rules were designed to
prevent companies from transferring assets outside Cyprus to avoid
taxation, ensuring that Cyprus retains the right to tax unrealized
capital gains before assets exit its tax net. The goal is to
prevent companies from shifting assets to low or zero-tax
jurisdictions without paying their fair share of taxes in Cyprus.
However, despite these measures, many businesses and investors
mistakenly believe that all cross-border asset transfers are
subject to exit taxation. In reality, exit taxation only applies in
specific cases where assets are moved outside Cyprus without being
sold or transferred at market value.
