Cyprus: Personal Taxation - Determination of Taxable Income

Last Updated: 24 November 1997
Taxable Income
Residents are subject to personal income tax on the aggregate income accruing in, derived from or received in Cyprus from:

  • a trade, business, profession or vocation. The general provisions for determining annual profits from a trade or business for individuals are the same as those for companies (see Chapter 4). The accruals method is applied except in the case of professionals who may choose to be taxed on a cash basis
  • employment, including the estimated annual value of any quarters, residence and any other allowance granted in respect of employment (whether in money or otherwise)
  • the annual value of immovable property, used for residence and not for gain, which is taken at 4% of the value as assessed by the Land Registry Office and shown on the registration certificate of the property
  • pensions and annuities
  • rents, royalties, premiums and any other profits or income arising from property, including the value, not exceeding cost, of tenants' alterations, etc., becoming the owner's property at the termination of the tenancy
  • profits from farming, etc.
  • any sums received on the sale of patents or patent rights, and royalties or other income received in respect of such patents
  • dividends
  • interest
  • any other profit not elsewhere specified

Exempt Income

Certain types of income are specifically exempted from income tax. These include retirement and death gratuities, commutation of pension, scholarship income, widows pension, provident funds and certain other types of income explained in more detail in the chapter on tax incentives.

The following annual investment income exemptions apply to individuals:

  • interest from any bank or co-operative society operating in Cyprus or from a public company debenture loan up to C£600
  • dividends from an approved public company up to C£1.200
  • interest from Cyprus government securities, saving certificates and from deposits with the Housing Finance Corporation without any limitation.

Deductions from Taxable Income

Generally all outgoings and expenses wholly and exclusively incurred for the production of income are deductible for tax purposes. Specifically, however, the following deductions are allowed:

  • professional tax
  • professional subscriptions
  • trade union subscriptions
  • charitable donations and contributions, subject to limitations
  • interest on a housing loan up to C£500
  • interest for any other loan up to C£100
  • 30% of the cost of purchasing shares of a first issue in a public company, subject to limitations
  • 40% of the amount saved under the Save As You Earn (S.A.Y.E.) scheme of the Housing Finance Corporation, subject to certain limitations
  • 30% of the agricultural income up to a maximum deduction of C£3.000
  • rent paid for private residence up to C£300 provided the family income does not exceed C£10.000.
  • deduction of 20% of gross rental income before deducting wear and tear allowances and loan interest.
  • donations to approved charities in Cyprus with receipt up to C£20.000 plus 50% of the amount over C£20.000
  • cost of bus tickets where the return distance between work and residence at rural area is over 30 kilometres - The whole amount.
Personal Allowances

The personal allowances deducted before arriving at the taxable income are:
spouse    C£500
child under 16 not attending secondary education  C£500
child in secondary education in Cyprus C£500
child in third grade school 
in Cyprus (tax relief not to exceed C£300)  C£1.500
child serving in the National Guard C£500
old age (over 65), (tax relief not to exceed C£300) C£1.500

Married persons are taxed separately and any allowances to which both spouses become eligible are apportioned according to their taxable income.

  • life insurance premium relief on local policies insuring self or spouse's life (not children). Premiums allowed are restricted to 7% of capital sum insured and premiums and contributions must not exceed 1/6th of taxable income. Furthermore, where a policy, issued on or after 1.1.1988, is cancelled at any time within the first six years part of the premiums already allowed as tax deductions are treated as income of the policyholder in the year of cancellation. If the cancellation is made at any time within the first three years the amount treated as income is 30% of the premiums allowed. If the cancellation is made at any time within the fourth, fifth and sixth year the income is 20% of the premiums allowed
  • contributions to the social insurance fund or other approved pension, provident or other funds are allowed, subject to limitations
  • premiums or contributions to an insurance company under a pension or medical scheme approved by the Commissioner of Income Tax . The tax relief will be restricted to 20% of the premiums or contributions
  • Double Taxation Relief

When the income is partly derived from foreign sources, certain types of income may be subject to double taxation. Relief from double taxation is given by virtue of double tax treaties concluded between Cyprus and other countries or, in the absence of any tax treaty, under unilateral provisions in the domestic law. Most treaties follow the OECD Model Convention.

Tax Rates

The tax rates for individuals are graduated starting at 20% on chargeable income from C£5.001 to C£8.000, 30% from C£8.000 to C£11.000 and 40% thereafter.

Tax Credits

Foreign income taxes on income charged to Cyprus income tax may be credited against the Cyprus tax liability. The credit is limited to the amount of Cyprus tax on that income from a foreign country . Taxes withheld at source, such as tax deducted from employment income and dividends, are credited against the income tax liability. Provisional tax paid during the year on income other than from employment is also credited against the final tax liability.

This information was correct as of 24 December 1996.

The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be obtained before any action is taken.

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