INCOME TAX – INDIVIDUALS
Imposition of tax
An individual, who is tax resident in Cyprus, is taxed on income accruing or arising from sources both within and outside Cyprus.
An individual, who is not tax resident in Cyprus, is taxed on income accruing or arising only from sources within Cyprus.
Tax residency
An individual is tax resident in Cyprus if he/she is present in Cyprus for more than 183 days in a tax year.
For the purpose of calculating the days of presence in Cyprus:
- 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.
As from 1 January 2017 an individual can be a tax resident of Cyprus even if he/she spends less than or equal to 183 days in Cyprus provided that he/she satisfies all of the following conditions within the same tax year (1 January – 31 December):
I. Does not spend more than 183 days in any other country, and
II. Is not a tax resident of any other country, and
III. Spends at least 60 days in Cyprus, and
IV. Maintains a permanent home in Cyprus that is either owned or rented, and
V. Carries on a business in Cyprus, is employed in Cyprus or holds an office in a person who is tax resident of Cyprus at any time during the tax year.
If the employment/business or holding of an office is terminated during the year, then the individual would cease to be considered a Cyprus tax resident for that tax year.
Personal income tax rates
The following income tax rates apply to individuals:
| Taxable income € |
Tax rates % |
Tax € |
Cumulative tax |
| 0 – 19.500 |
0 |
0 |
0 |
| 19.501 – 28.000 |
20 |
1.700 |
1.700 |
| 28.001 – 36.300 |
25 |
2.075 |
3.775 |
| 36.301 – 60.000 |
30 |
7.110 |
10.885 |
| 60.001 and over |
35 |
|
|
Exemptions
The following are exempt from income tax:
| TYPE OF INCOME |
EXEMPTION |
Interest income
(Interest income arising from the ordinary business activities or closely related to the ordinary business activities of an individual, is not considered as interest income and is not exempt. In addition, interest income may subject to Special Contribution for Defence) |
The whole amount |
Dividend income
(Dividend income may be subject to Special Contribution for Defence) |
The whole amount |
Remuneration from any employment exercised in Cyprus by an individual who was not a tax resident of Cyprus before the commencement of his employment in Cyprus, exemption applies for a period of 10 years for employment commencing as from 1 January 2012, provided that the annual remuneration exceeds €100.000.
For employment commencing during or after 2015, the exemption does not apply in case the employee was a Cyprus tax resident in the preceding tax year or for at least 3 out of the last 5 tax years immediately prior to the tax year of commencement of employment. In certain cases it is possible to claim the exemption where income falls below €100.000 per annum. |
50% of the remuneration |
Remuneration from any employment exercised in Cyprus by an individual who was not a tax resident of Cyprus before the commencement of his employment in Cyprus.
For employment 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 (expected to be extended up to 2025).
This exemption may not be claimed in addition to the immediately above mentioned 50% exemption from employment income. |
20% of the remuneration or €8.550 (whichever is the lower) |
| Remuneration from the rendering of salaried services outside Cyprus to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer, for a total period in a tax year of more than 90 days. |
The whole amount |
Profits from the sale of securities
The term ‘Securities’ is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon. |
The whole amount |
| Profits of a permanent establishment abroad under certain conditions |
The whole amount |
| Lump sum received as retiring gratuity, commutation of pension, death gratuity or as consolidated compensation for death or injury |
The whole amount |
| Lump sum repayment from life insurance schemes or from approved provident funds |
The whole amount |
Tax deductions
The following are deducted from income:
| Deductible expenses |
Deduction |
| Subscriptions to trade unions or professional bodies |
The whole amount |
| Donations to approved charitable organisations (with receipts) |
The whole amount |
| Interest relating to the acquisition of fixed assets used in the business |
The whole amount |
| Expenses for letting of building |
20% of the rental income |
| Interest in respect of the acquisition of a building for rental purposes |
The whole amount |
| Investment in an innovative small and medium sized business (subject to conditions) |
Up to the whole amount |
Personal tax allowances
The following are deductible from income:
| Deductible expenses |
Allowance |
| Social insurance contributions, Contributions to approved provident and pension funds and the General Health Plan, Contributions to medical fund (maximum 1,5% of remuneration), Life insurance premiums in respect of the life of the claimant (maximum 7% of the insured amount) |
Limited to 1/5 of the taxable income before this allowance |
Tax credit for foreign tax paid
Any foreign tax paid on income subject to income tax in Cyprus is credited against any Cyprus income tax payable on such income, irrespective of the existence of a tax treaty.
NATIONAL HEALTH SYSTEM
As per National Health System Law of 2001 (89(I)/2001) as amended, a national health system is introduced in the Republic aimed to provide to the population equal access to a holistic health care system.
All citizens who have their normal residence in the Republic’s controlled areas are eligible to the National Health System.
As per the applicable legislation, contributions are calculated and paid as a percentage on the gross emoluments/pensions as follows:
| Ref |
Category |
Applied on |
Rate |
| (i) |
Employees |
Own emoluments |
2.65% |
| (ii) |
Employers |
Employees’ emoluments |
2.90% |
| (iii) |
Self – employed |
Own income |
4.00% |
| (iv) |
Pensioners |
Pension |
2.65% |
| (v) |
Persons holding office |
Officers’ Remuneration |
2.65% |
| (vi) |
Legal person responsible for remuneration of persons holding an office |
Officers’ Remuneration |
2.90% |
| (vii) |
Persons earning rental, interest, dividend etc |
Rental, Interest, Dividend Income etc |
2.65% |
| (viii) |
Republic’s Consolidated Fund |
Emoluments/ Pension of persons (i), (iii), (iv), (v) |
4.70% |
Where the total emoluments, pension income and other income exceed €180.000, contributions to the National Health System are paid only on the amount of €180.000. contributions are applied first to the emoluments earned out of employment, self-employment and office and subsequently on pension income and other income.
SPECIAL CONTRIBUTION FOR DEFENCE – INDIVIDUALS
Special contribution for defence is imposed on dividend income, ‘passive’ interest income and rental income earned by companies tax resident in Cyprus and by individuals who are both Cyprus tax resident and Cyprus domiciled.
It is charged at the rates shown in the table below:
| Source |
Rates for individuals |
| Dividend income from Cyprus tax resident companies |
17% (1) |
| Dividend income from non-Cyprus tax resident companies |
17% (1) |
| Interest income |
30% (1), (2) |
| Rental income (reduced by 25%) |
3% (1) |
Notes:
1. Prior to 16 July 2015, individuals where subject to special contribution for defence if they were tax resident in Cyprus. As from 16 July 2015, individuals are subject to special contribution for defence if they are both Cyprus tax resident and Cyprus domiciled.
An individual is domiciled in Cyprus for the purposes of special contribution for defence if he/she has a domicile of origin in Cyprus per the Wills and Succession Law (with certain exceptions) or if he/she has been a tax resident in Cyprus for at least 17 out of the 20 tax years immediately prior to the tax year of assessment. Anti-avoidance provisions apply.
2. Interest income arising from the ordinary business activities or closely related to the ordinary business activities of an individual, is not considered interest for special contribution for defence purposes and is therefore exempt from special contribution for defence. Such interest income is subject to personal income tax.