Salaried Income

Foreign employees working for local companies are taxed at full rates on their earned income.

Special tax privileges are granted to foreign nationals rendering salaried services to Cyprus registered offshore entities (companies or partnerships) and companies established in the Industrial Free Zone of Larnaca and to foreign employees of foreign companies rendering services outside Cyprus. These are:

  • foreign employees of offshore entities (as well as businesses established in the Industrial Free Zone of Larnaca) employed in Cyprus are liable to income tax on their earnings at 50% of normal rates. Full personal allowances are allowed against taxable income. However, the taxpayer may opt to be taxed in the normal way where the special mode of taxing their income results in higher tax liability
  • foreign employees of offshore entities employed outside Cyprus are completely exempt if their salary is received in or through Cyprus. If their salary is not received in or through Cyprus they are taxed at 10% of the normal rates. Personal allowances for such individuals are limited to the earned income relief
  • in the case of foreign employees of offshore companies employed partly in Cyprus and partly abroad, the earnings relating to the period of stay in Cyprus are taxed at 50% of the rates, while the earnings for the period of stay abroad are either exempt or liable to 10% of the rates, depending on whether they are received in Cyprus or not.

A non-resident person employed in Cyprus as an expert under an employment contract is completely exempt from tax in respect of his remuneration in Cyprus if:

  • he does not stay in Cyprus for more than 183 days in aggregate in the year and
  • the remuneration is paid by or on behalf of a non-resident employer and
  • the remuneration is not borne by any person liable to tax in Cyprus.
Foreign diplomats or consular representatives are exempt in respect of their remuneration on the basis of reciprocity.

Investment Income

Foreign investment income remitted to Cyprus by an individual is tax free in respect of the first C'2.000 and, thereafter, is taxed at a flat rate of 5%, provided that such individual:

  • is not a citizen of Cyprus and
  • is not a permanent resident or holds a permanent residence permit and
  • does not carry on, directly or indirectly, any trade or business in Cyprus.

Individuals who, though citizens, were established permanently outside Cyprus when the investments were acquired, also enjoy these exemptions.

Other Income

  • foreign pensions in respect of services rendered abroad and remitted to Cyprus are tax free in respect of the first C'2.000 and, thereafter, are taxed at a flat rate of 5%. However the taxpayer may opt to be taxed in the normal way where the special mode of taxing his income results in higher tax liability
  • professional person and public entertainers not ordinarily residing in Cyprus are subject to tax in respect of their gross income in Cyprus at a rate of 15% if their stay in Cyprus is less than 183 days in a year of assessment
  • coaches and athletes of athletic teams whose presence in the Republic does not exceed a period of two years are taxed at a rate of 15% on their gross receipts.

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.