Basis of taxation
All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed only on income accrued or derived from sources in Cyprus.
An individual is tax resident in Cyprus if he spends in Cyprus more than 183 days in any one year.
Furthermore an individual is also considered a Cyprus tax resident if he/she:
- remains in Cyprus for at least 60 days during the tax year;
- carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident company at any time during the tax year; and
- maintains a permanent residence in Cyprus, which can be either owned or rented.
provided that he/she:
- does not spend more than a total of 183 days in any country within a tax year; and
- is not a tax resident of another country within the same tax year
Where the employment/business or holding of an office as per (b) above is terminated, then the individual shall cease to be considered a Cyprus tax resident for that tax year under the 60 days tax residency scheme.
Days in and out of Cyprus are calculated as follows:
- the day of departure from Cyprus counts as a day of residence outside Cyprus.
- the day of arrival in Cyprus counts as a day of residence in Cyprus.
- arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus.
- departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus.
Personal tax rates
The following income tax rates apply to individuals:
|CHARGEABLE INCOME €||TAX RATE %||TAX €||ACCUMULATED TAX €|
|19.501 – 28.000||20||1.700||1.700|
|28.001 – 36.300||25||2.075||3.775|
|36.300 – 60.000||30||7.110||10.885|
|60.001 and above||35||-||-|
The following income is exempted from income tax:
|TYPE OF INCOME||EXEMPTION LIMIT|
|Remuneration from any office or employment exercised in Cyprus by an individual who was not resident of Cyprus before the commencement of his employment, for a period of 5 years commencing from 1 January following the year of commencement of the employment (provided the employment takes place within 6 months) – applicable up to 2025||20 % of income subject to maximum of €8.550 annually|
|For high earning individuals moving to Cyprus (for employments commencing after 1 January 2012) a 50% deduction will apply for the first ten years provided that the income from employment exceeds €100.000 per annum. This exemption applies for both Cypriot and non Cypriot citizens. For employments commencing as from 1 January 2015, this exemption is applicable only where the individual was not resident in Cyprus prior to his/her employment and provided that the individual was not a Cyprus tax resident for at least 3 out of the 5 years preceding the year of employment. This exemption cannot be used together with the exemption stated in the above point of 20% or €8.550||50 % deduction|
|Income or profit (net of all direct expenses) generated from the sale or exploitation of intellectual property owned by a Cypriot resident.||80 % exemption|
|Remuneration from salaried services rendered outside Cyprus for more than 90 days in a tax year to a non Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer||whole amount|
|Profits or a permanent establishment abroad under certain conditions||whole amount|
|Capital sums accruing to individuals from any payments to approved funds (eg. provident funds)||whole amount|
|Profits from the sale of securities*||whole amount|
|Lump sum received by way of retiring gratuity, commutation of pension or compensation for death or injuries||whole amount|
* Securities are defined as shares, bonds, debentures, founders' shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon. A circular was issued by the Tax Authorities in 2008 further clarifying what is included in the term "securities". According to the circular the term includes, short positions, futures, forwards and swaps where they are in respect of securities and depositary receipts (ADR,GDR). Index participations are considered securities only if they represent titles. Where it is not certain whether a specific financial instrument falls under any of the categories included in the circular, a request for a ruling may be submitted to the Commissioner of Income Tax.
The following are deducted from income:
|Contributions to trade unions or professional bodies||whole amount|
|Loss of current year and previous years||whole amount|
|Rental income||20 % of gross rental income|
|Special Tax Contribution||whole amount|
|Donations to approved Cypriot charitable organizations (with receipts)||whole amount|
|Social Insurance, provident fund, medical fund, NHS contributions, pension fund contributions and life insurance premiums (the allowable annual life insurance premium is restricted to 7% of the insurable amount)||
|Expenditure incurred for the maintenance of a building (under Preservation Order)||Depending on the size of building up to € 1.200 per m2|
|Expenditure incurred for the acquisition of shares in an innovative business||whole amount|
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.