NFT sales and DeFi rewards have become genuine sources of wealth for thousands of investors. When that wealth needs to support a Cyprus residency application, the documentation challenge becomes very real. Immigration authorities want clear, verifiable records that prove your income is legitimate. Banks opening accounts for new residents ask similar questions.
This article explains what Cyprus authorities expect, how to structure your records for maximum clarity, and where NFT and DeFi earnings fit within the broader Cyprus tax framework.
Understanding How Cyprus Views Crypto Income
Cyprus has taken a measured approach to cryptocurrency taxation. Unlike jurisdictions with dedicated crypto legislation, the country applies general principles from existing law. The Cyprus Tax Department uses what practitioners call the “badges of trade” test to decide whether your activity constitutes trading or passive investment.
Several factors determine this classification:
- Frequency and volume of transactions
- Whether profit generation was your primary intention
- The degree of organisation behind your activity
- How quickly you disposed of assets after acquisition
Active participation in DeFi protocols, frequent NFT flips, or yield farming almost certainly fall into the trading category. That means earnings are taxable as income rather than as capital gains. gains Individuals face progressive rates from 0% to 35%, while companies pay the standard 12.5% corporate rate (rising to 15% from 2026).
From January 2026, a new Article 20E introduces a flat 8% rate on crypto gains for both individuals and companies. This applies to sales of fiat, crypto-to-crypto exchanges, payments made in digital assets, and even donations. The provision aligns with MiCA definitions from EU Regulation 2023/1114. Losses can only offset crypto gains within the same tax year; they cannot be carried forward.
Staking rewards, yield farming income, airdrops, and token rewards from DeFi participation are generally taxed as ordinary income at the point you gain control over them. Mining income is treated similarly under self-employment or business income rules.
NFTs occupy an interesting position. Truly unique tokens fall mostly outside the scope of MiCA, but collections require a white paper detailing their purpose and blockchain mechanics. The Cyprus Tax Department has not issued specific guidance on NFTs, though general property taxation principles apply.
What Immigration Applications Actually Require
The Cyprus Permanent Residency programme under Regulation 6(2) requires a minimum investment of €300,000 plus demonstrated annual income of at least €50,000 from foreign sources. Spouses add €15,000 to this requirement; each child adds €10,000.
Here is the critical point for crypto wealth holders: funds used for investment must demonstrably originate abroad and be transferred from the applicant’s bank account. That creates an immediate documentation burden for anyone whose wealth originated in DeFi protocols or NFT marketplaces.
Immigration officials and their advisors need to trace money backwards. They want to see how tokens were acquired, what happened during the holding period, and how eventual conversion to fiat occurred. AML regulations demand this paper trail. Banks processing transfers apply similar scrutiny.
The standard documentation package for crypto-derived income should include:
Exchange records
- Complete transaction histories from centralised exchanges
- Deposit and withdrawal logs with timestamps
- Account statements showing fiat on-ramps and off-ramps
Wallet documentation
- Address ownership proof (signed messages work well)
- Transaction histories exported from blockchain explorers
- Screenshots of holdings at key dates
DeFi-specific records
- Liquidity pool entries and exits with corresponding LP token movements
- Staking reward distributions, including dates and token values
- Yield farming positions across protocols
- Smart contract interaction logs
NFT documentation
- Purchase receipts showing acquisition cost and date
- Sales record,s including marketplace fees
- Royalty payment histories for creators
- Fair market values at receipt for airdrops
Supporting materials
- Bank statements showing fiat conversions
- Tax returns from your country of residence
- Professional valuationwerere necessary
- Blockchain analytics reports (Chainalysis, TRM Labs, or similar)
Building a Documentation System That Works
Record-keeping for DeFi and NFT activity requires a consistent methodology. Tax authorities and immigration reviewers both expect records created contemporaneously, meaning documented at or near the time of each transaction rather than reconstructed years later.
Start with a transaction log capturing these elements:
| Data Point | Why It Matters | Source |
| Transaction date | Establishes holding period and tax year | Blockchain timestamp |
| Asset received | Identifies a taxable receipt | Exchange/wallet export |
| Fair market value at receipt | Sets the income amount and cost basis | Price feed (CoinGecko, CoinMarketCap) |
| Transaction hash | Proves authenticity | Blockchain explorer |
| Gas fees paid | Adjusts cost basis | Wallet records |
| Platform used | Shows transaction context | Protocol interface |
For DeFi participants, the complexity multiplies. A single yield farming position might involve depositing tokens into a liquidity pool, receiving LP tokens, staking those LP tokens to earn governance rewards, periodically claiming rewards, and eventually unwinding the position. Each step is a taxable event under Cyprus rules if it is classified as a trading activity.
Crypto tax software can automate much of this work. Platforms like Koinly, CoinTracker, or TokenTax connect directly to exchanges and wallets, pull transaction data, and apply cost basis calculations. The output becomes part of your application documentation.
NFT creators face additional requirements. Royalty income streams from secondary sales need to be tracked across multiple marketplaces. OpenSea, Blur, and Magic Eden each generate separate payment flows that must be aggregated. Smart contracts automatically distribute these payments, but someone needs to capture the fair market value at each distribution.
Cyprus applications filed after 2026 will face enhanced scrutiny under DAC8 and the OECD Crypto-Asset Reporting Framework. Crypto-Asset Service Providers registered in Cyprus must collect user data, verify residency, and report annually on transfers and balances. Your documentation should be prepared with this transparency in mind.
Tax Residency and the Non-Dom Advantage
Beyond the permanent residency investment programme, Cyprus offers non-domiciled status, which significantly affects how crypto income is treated. Individuals who become Cyprus tax residents but qualify as non-domiciled benefit from an exemption on the Special Defence Contribution for dividend and interest income. This status lasts for 17 years.
Becoming a Cyprus tax resident requires either spending 183 days in the country during a tax year or meeting the 60-day rule, subject to additional conditions. The 60-day route requires maintaining a permanent home in Cyprus, not being tax resident elsewhere, and having business activity in the country (employment, directorship, or similar).
For crypto entrepreneurs, structuring through a Cyprus company while holding non-dom status can create favourable outcomes. The corporate tax rate remains competitive, business expenses become deductible, and dividends distributed to non-dom shareholders avoid SDC.
CySEC, the Cyprus Securities and Exchange Commission, oversees Crypto-Asset Service Providers operating in the jurisdiction. Businesses seeking registration must meet licensing requirements and demonstrate proper AML compliance. The Innovation Hub, launched in 2018, continues supporting fintech development while maintaining investor protection standards.
Annual filing obligations require you to file your crypto activity on the appropriate tax form and supporting schedules. The Cyprus tax year runs parallel to the calendar year, with returns generally due by July 31 of the following year. Self-employed individuals earning above €70,000 have extended deadlines.
Professional advice becomes essential when DeFi and NFT income intersect with immigration planning. The interaction between trading classification, corporate structuring, non-dom benefits, and investment requirements creates complexity that generic guidance cannot adequately address.
Frequently Asked Questions
Is crypto taxed in Cyprus, and how do I declare income from digital assets?
Cyprus taxes crypto based on activity classification. Trading income is subject to progressive rates for individuals (0-35%) or corporate rates for companies (currently 12.5%). From 2026, Article 20E introduces an 8% flat rate on crypto disposal gains. You declare income through your annual tax return, categorising crypto proceeds according to whether the activity constitutes trading or passive holding. Professional guidance helps ensure proper classification, particularly for complex DeFi positions involving multiple protocols and token types.
What documentation do banks and immigration authorities expect for NFT sales?
Banks processing applications from NFT sellers require marketplace transaction records, wallet ownership proof, and clear conversion trails showing how tokens were converted to fiat. Immigration authorities need similar documentation plus evidence that the funds originated from abroad. Comprehensive records include purchase receipts, sale confirmations, royalty payment histories, fair market valuations at key dates, and blockchain analytics reports. The goal is to demonstrate legitimate acquisition without gaps in the audit trail.
How does the non-dom regime affect crypto investors relocating to Cyprus?
Non-domiciled tax residents enjoy an exemption from the Special Defence Contribution on dividends and interest for 17 years. This means that dividends from a Cyprus company holding crypto investments are not subject to the 17% SDC that applies to domiciled residents. Combined with the 12.5% corporate rate and potential structuring options, non-dom status creates meaningful tax planning opportunities. You qualify if you were not a Cyprus tax resident for 17 of the last 20 years and do not have a Cyprus domicile of origin.
What is Section 33 of the Cyprus income tax law regarding cryptocurrency?
Section 33 deals with deductions allowable against taxable income, including business expenses incurred wholly and exclusively for producing that income. For crypto businesses, this means trading fees, software costs, blockchain analytics subscriptions, and professional services can reduce taxable profits. The provision applies equally to crypto companies and traditional businesses. However, losses from crypto disposals under the new 2026 regime cannot offset non-crypto income; they remain ring-fenced within the crypto taxation framework.
Speak With Our Team
Documenting NFT and DeFi income for Cyprus applications requires careful preparation and professional guidance. C. Savva & Associates LTD provides services covering tax classification, immigration documentation, and ongoing compliance for crypto-derived wealth.
Contact our team to discuss your situation and learn how we can support your relocation plans to Cyprus.