Income Tax in Cyprus

personal taxation and the rates.

Income Tax in Cyprus.

Income tax in Cyprus is considered to be one of the most attractive regimes in the EU but also worldwide. Cyprus tax residents are taxed on all chargeable income from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on certain income from sources in Cyprus. Income tax advantages  are attracting international entrepreneurs, professionals and high net worth individuals to relocate in the country.

The 183 days rule.

An individual who spends more than 183 days in Cyprus in a calendar year is considered a Cyprus tax resident. Days in and out of the republic are calculated as below:

  • The day of departing out of Cyprus is considered a day out of the republic
  • The day of arrival in Cyprus in considered a day within the republic
  • Arriving and departing out of the Cyprus in the same day counts as one day of residence in Cyprus
  • Departing and returning in Cyprus the same day counts as a day out of the republic
  • Foreign taxes paid can be credited against the personal income tax liability

The 60 days rule.

As from 1 January 2017, an individual may also be considered tax resident in Cyprus under the “60 days rule”. The rule applies when:

  • do not reside in any other single state for a period exceeding 183 days in aggregate, and
  • are not considered tax resident by any other state, and
  • reside in Cyprus for at least 60 days, and
  • have other defined Cyprus ties. To satisfy this condition the individual must carry business activity in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year. The individual must also maintain in a permanent residential property in Cyprus, either by rent or ownership.

The days in and out of Cyprus are calculated as per the 183 days rule.

Personal Tax rates.

Taxable Income Rate Amount
up to €19.500
zero
zero
€19.501 - €28.000
20%
€1.700
€28.001 - €36.300
25%
€2.075
€36.301 - €60.000
30%
€7.110
€60.000 - €100.000
35%
€14.000
€100.000 +
35%
€ -

Income Tax Exemptions.

Type of Income Exemptions
Interest, except for interest arising from the ordinary business activities or closely related to the ordinary business activities of an individual
The whole amount
Dividends
The whole amount
Remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment. For employments commencing during or after 2012 the exemption applies for a period of 5 years starting from the tax year following the year of commencement of the employment with the last eligible tax year being 2020. This exemption may not be claimed in addition to the immediately above mentioned 50% exemption for employment income.
20% of the remuneration with a maximum amount of €8.550 annually
Remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment, exemption applies for a period of 10 years for employments commencing as from 1 January 2012 provided that the annual remuneration exceeds €100.000. For employments commencing as from 1 January 2015 the exemption does not apply in case the said individual was a Cyprus tax resident for 3 (or more) tax years out of the 5 tax years immediately prior to the tax year of commencement of the employment nor in the preceding tax year. In certain cases it is possible to claim the exemption where income falls below €100.000 per year.
50% of the remuneration
Profits of a foreign permanent establishment under certain conditions
The whole amount
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
The whole amount
Capital sums accruing to individuals from any payments to approved funds
The whole amount
Lump sum received by way of retiring gratuity, commutation of pension or compensation for death or injuries
The whole amount
Profits from the production of films, series and other related audiovisual programs
The lower of 35% of the eligible expenditure and 50% of the taxable income. Any restriction may be carried forward for 5 years.
Profits from the sale of securities
The whole amount

Income Tax Deductions.

Type of Income Deductions
Loss of current year and previous years (for individuals required to prepare audited financial statements, current year losses and losses of the previous five years only may be deducted)
The whole amount
Contributions to trade unions or professional bodies
The whole amount
Donations to approved charities
The whole amount
Expenditure incurred for the maintenance of a building in respect of which there is in force a Preservation Order
Up to €1.200, €1.100 or €700 per square meter
Rental income
20% of gross rental income
Eligible infrastructure and technological equipment expenditure in the audiovisual industry
20%
Amount invested each tax year as from 1 January 2017 in approved innovative small and medium sized enterprises either directly or indirectly
Up to 50% of the taxable income as calculated prior to this deduction (subject to a maximum of €150.000 per year) (
Social Insurance, National Health System medical fund, private medical fund insurance contributions (maximum 1,5% of remuneration), pension and provident fund contributions (maximum 10% of remuneration) and life insurance premiums (maximum 7% of the insured amount)
Up to 1/5 of the chargeable income (1/6 up to tax year 2018)

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Our Tax Specialists will be happy to advice you.
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