Personal Income Tax

 

Residence


The Cyprus Income Tax Law defines a “resident in the Republic”, when applied to an individual, to being an individual who stays in the Republic for a period or periods exceeding in aggregate 183 days in the year of assessment. A “nonresident or resident outside the Republic” will be construed accordingly.

Resident persons will be charged to tax on their worldwide income.

 

Non-resident persons will be charged to tax on their income accruing or arising in respect of:

 

•  Income from any trade, business, profession or vocation carried on or exercised as far as attributable to a permanent establishment in Cyprus ;

•  Profits or other benefits from any office or employment exercised in Cyprus ;

•  Any pension as a result from a past employment exercised in Cyprus with the exception of any pension paid out of funds created by the Government or a local authority;

•  Rents from property situated in Cyprus ;

•  Trade Goodwill from sources within Cyprus .

 

 

Rates of Tax


The Income Tax rates for individuals are progressive as seen from the table below:

 

Chargeable
Income
EUR

Rate of Tax
%

Cumulative
Tax
EUR

Up to – 19.500

Nil

Nil

19.501 – 28.000

20

1.700

28.001 – 36.300

25

2.075

36.301 – 60.000

30

7.110

Over 60.001

35

 

 

 

Salaried income


In addition to remuneration in cash, virtually all benefits in kind received by an employee for work or services rendered constitute taxable income and subject to the progressive tax rates indicated above. However, 20 percent of the emoluments from any employment which is exercised in Cyprus by an individual not resident in Cyprus before taking up employment in Cyprus or EUR 8.543 whichever is the lowest are exempt from income tax. This exemption applies for a period of three (3) years commencing from 1st January of the year following the year of commencement of such employment.

 

After the changes in the tax legislation enacted by the Cyprus Parliament 50% of gross emoluments is allowed to be deducted from taxable income for individuals that are Cyprus tax residents for the first time. This deduction is allowed for 5 years of employment and applies if the employment income exceeds €100.000 per annum (effected from 1 January 2012).

 

Remuneration derived from the rendering of salaried services outside Cyprus to a nonresident employer or to a permanent establishment situated outside Cyprus of a resident employer for a total aggregate period in the year of assessment of more than 90 days will be exempted from tax.

 

 

 

Temporary Contribution

 

As of 1st January 2012 and for the next two year, the employees in the private sector shall contribute to the Government in accordance to their salaries. The contribution will be calculated as a % on gross salary and will be paid equally by the employer and the employee.

 

Gross Salary (€)

% Employer Contribution

% Employee Contribution

0 -2.500

0%

 

2.501 - 3.500

1,25%

1,25%

3.501 - 4.500

1,50%

1,50%

Over 4.501

1,75%

1,75%

 

 

Rental Income


Income, earned by a Cyprus tax resident individual, arising from the rental of immovable property which is situated in Cyprus is taxable both under the Cyprus Income Tax and the Special Contribution Tax legislation as follows:

 

• i. Individual Income Tax
80% of the rental income derived by the client from the rental of the immovable property which is situated in Cyprus (reduced by the wear and tear allowance plus any interest expenses suffered towards the acquisition of the property) will be included in his/her personal income and subject to the progressive personal income tax rates illustrated above.

 

• ii. Special Contribution Tax (applies only to Cyrus Tax Resident Individuals and Companies)
Under the Special Contribution tax, an amount of twenty five percent (25%) is deducted from the gross amount of rental income. After such deduction has been effected, the remaining gross amount is subject to special contribution tax at a rate of three percent (3%).

Interest income

The total interest income derived by a Cyprus tax resident individual will be exempt from corporate income tax. However the gross interest received or credited will be subject to Special Contribution for the Defence tax at the rate of 15%.

 

 

Foreign pensions


Foreign pensions in respect of services rendered abroad are tax free in respect of the first €3.417, thereafter are taxed at a flat rate of 5 percent. Alternatively, if it is to the recipients benefit, he/she may exercise the option every year to be taxed at the normal rates.

 

 

Wealth Taxes


Cyprus imposes no tax on wealth.

 

 

Double taxation treaties

Double taxation treaties are made in order to avoid paying income tax in two countries. This gives the option to the citizen of the countries to take advantage of the low rate of tax in Cyprus . Countries that Cyprus has double taxation treaties are: (many other countries are under negotiations).

 

 

Azerbaijan

Austria

Belarus

Belgium

Bosnia and Herzegovina

Bulgaria

Canada

Croatia

China

Czech Republic

Denmark

Egypt

FYROM

France

Germany

Greece

Hungary

India

Ireland

Italy

Kyrgyzstan

Kuwait

Lebanon

Malta

Mauritius

Moldova

Montenegro

Norway

Poland

Qatar

Romania

Russian Federation

San Marino

Singapore

Serbia

Seychelles

Slovak Republic

Slovenia

South Africa

Sweden

Syria

Tajikistan

Thailand

Turkmenistan

Uzbekistan

Ukraine

United Kingdom

United States

Armenia

 

 

Summary of Tax Benefits | Corporate Tax Provisions | Personal Income Tax

For more information please refer to KPMG website www.kpmg.com.cy