Tax Treaty Between Israel and Cyprus 2026

For an Israeli investor in a property in Larnaca, understanding the tax treaty between Israel and Cyprus is essential to avoid paying double tax on the same income.

Existence of the Treaty

There is a valid tax treaty between Israel and Cyprus, which includes provisions regarding the taxation of dividends (5% if the actual holder holds at least 10% of the capital, otherwise 15%), interest (10%), and royalties (5%). Tax treaties between countries are generally designed to prevent a situation where the same income is taxed twice - once in the country of origin and once in the country of residence.

Real Estate Taxation Specifically

According to an accepted international standard (and in many tax treaties based on the OECD model), income and capital gains from real estate are primarily taxed in the country where the property itself is located - meaning that rental income and capital gains tax on a property in Cyprus will primarily be taxed in Cyprus. However, the exact manner in which this is implemented, and how Israel treats this income for Israeli tax purposes (foreign tax credit, exemption, or additional reporting obligation), is a specific matter that requires individual examination with an accountant familiar with both tax systems.

What is Important to Know in Practice

Even when a tax treaty exists, the Israeli investor is still required to report foreign income to the tax authorities in Israel - the treaty is intended to prevent actual double taxation (usually through a foreign tax credit), not to exempt from the reporting obligation itself.

Main Recommendation

Due to the complexity of applying international tax treaties to a specific case, it is highly recommended to consult with an accountant specializing in international taxation who is familiar with both Israeli law and Cypriot law, before and after any investment.

In Conclusion

Note: The information in this article is a general overview only and does not constitute personal tax advice. Tax rates and benefits may change and depend on the personal circumstances of each investor. It is always advisable to consult with an accountant and attorney specializing in Cypriot and Israeli taxation before making a purchase.