PERSONAL INCOME TAX
TAX RESIDENCY AND LIABILITY
An individual is tax residence in Cyprus if he physically present in Cyprus for an aggregate period exceeding 183 days in the tax year “183 days rule”.
An individual may also be considered tax resident in Cyprus if he satisfies the “60 days rule”. The following conditions must be satisfied:
- The individual does not reside in any other single state for a period exceeding 183 days in aggregate, and
- The individual is not tax resident in any other state, and
- The individual resides in Cyprus for at least 60 days, and
- The individual maintains in the tax year a permanent residential property in Cyprus which is either owned or rented by him.
- The individual has other defined Cyprus ties. To satisfy this condition the individual must carry out any business in Cyprus or must be employed in Cyprus, or hold an office (director) of a company tax resident in Cyprus.
For the purposes of both the “183 days rule” and the “60 days rule” 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
Tax residents are liable to tax in Cyprus on their worldwide income, whereas non-residents are only liable to tax in Cyprus on certain income arising in Cyprus. (double tax treaties and double taxation relief exist).
An individual is tax residence in Cyprus if he physically present in Cyprus for an aggregate period exceeding 183 days in the tax year. Tax residents are liable to tax in Cyprus on their worldwide income, whereas non-residents are only liable to tax in Cyprus on certain income arising in Cyprus. (double tax treaties and double taxation relief exist).
TAX RATES*
| Chargeable 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 |
| Over 60.000 | 35 |
*The above rates are valid from tax year 2008.
*Foreign pension income is taxed at the flat rate of 5% on amounts over €3.420. The taxpayer may elect on an annual basis to be taxed at the normal tax rates and bands set out above.
*Cyprus source window(er)’s pension income is taxed at the flat rate of 20% on amounts over €19.500. The taxpayer may elect on an annual basis to be taxed at the normal tax rates and bands set out above.
EXEMPTIONS
| Interest Income | 100% |
| Dividend Income | 100% |
| Profits from disposal of shares and other securities | 100% |
| Profits from permanent establishment abroad under certain conditions | 100% |
| Foreign pension | €3.420 |
| Capital sums accruing from any payments to approved funds (eg provident funds) | 100% |
| Lump sum received by way of retiring gratuity, compensation for death or injury, or computation of pension | 100% |
| Remuneration from salaried services rendered outside Cyprus to a permanent establishment abroad or to a foreign employer for more than 90 days in a tax year | 100% |
| Remuneration from any office or employment of an individual in Cyprus provided that he was not resident in Cyprus before the Commencement of his employment. The exemption is granted for a period of 10 years, for employments commencing from 1 January 2012 if the annual remuneration exceeds €100.000. (For employments commencing from 01/01/2015 the exemption does not apply in case the individual was a Cyprus tax resident for at least 3 tax years out of the 5 tax years immediately prior to the tax year of commencement of the employment. | 50% |
| Remuneration from any office or employment of an individual in Cyprus provided that he was not resident in Cyprus before the Commencement of his 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. The last eligible year is 2020. (This exemption is granted provided the above 50% exemption is not claimed). | 20% (up to the maximum of €8.550) |
DEDUCTIONS
| Donations to approved charities | 100% |
| Subscriptions to trade unions and professional bodies | 100% |
| Expenditure incurred for the acquisition of shares in an innovative business. | 100% |
| Life insurance premiums and contributions to pension funds (<7% of the insured amount) and contributions to Social Insurance, Provident funds, and Medical funds (<1.5% of remuneration) | Restricted to 1/6 of the taxable income |
| Rental income | 20% of income together with the loan interest and the wear and tear allowance. Any interest expense accruing on borrowings that were obtained by the individual to finance the acquisition of the building that is generating the income as well as wear and tear allowances for the building |
| Expenditure incurred for the maintenance of a building in respect of which there is in force a Preservation Order | Up to €1.200 per square meter, depending on the size of the building |
| Loss of current and previous years (provided audited accounts) | 100% |