The Cyprus Tax Department has recently issued a circular clarifying its earlier circular EE 2017/4 dated 24 July 2017 regarding the income tax exemptions for persons taking up employment in Cyprus under article 8(23) of the Income Tax Law 118(I)/2002 as amended.
Under article 8(23), 50% of the first ten years' earnings from employment in Cyprus of a person who was not previously resident in Cyprus is exempt from income tax, provided these earnings exceed €100,000 per annum. The exemption is not available if the individual was a tax resident of Cyprus for the tax year immediately preceding the beginning of the employment or for three or more of the five years immediately preceding the beginning of the employment. It is available in any of the ten years that earnings from employment exceed €100,000, even though they may fall below that level in some years, as long as the variations are not artificial and for the purpose of obtaining the exemption.
The new circular makes clear that earnings from employment include all the earnings derived from the employment. Specifically, if an individual receives remuneration from a company in a managerial or executive capacity, and also receives remuneration as a non-executive director, all the remuneration is aggregated for the purpose of determining eligibility to the exemption and calculating the tax liability.
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