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 on income accrued or derived from sources in Cyprus.
Resident in Cyprus for an individual means someone staying in Cyprus for a period or periods exceeding in aggregate 183 days in the year of assessment.
In the case of a person who is tax resident in Cyprus tax is levied on all income accruing or arising from sources both within and from outside of Cyprus including remuneration from employment.
Non-resident persons are taxed only on the income accruing or arising from sources in Cyprus including remuneration from employment exercised in Cyprus.
The new tax legislation, which came into effect on 1st January 2003, conforms with the requirements of the European Union in respect of its code of conduct for business taxation and of the OECD in its campaign against harmful tax competition.
The following income tax rates apply to individuals:
Chargeable income
Tax rate
Accumulated tax
€
%
€
0-19.500
Nil
Nil
19.501-28.000
20
1. 700
28.001-36.300
25
3.775
36.300-60.000
30
10.885
Over 60.000
35
Foreign pension is taxed at the rate of 5%. An annual exemption of € 3.417 is granted.
Exemptions
The following are exempt from income tax:
Type of income
Exemption limit
Interest
The whole amount
Dividends
The whole amount
Remuneration from any office or employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of his employment, for a period of 5 years for employments commencing as from 1 January 2012 if the annual remuneration exceeds €100.000.
50% of income
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 3 years commencing from 1st January following the year of commencement of the employment
20% of income with a maximum amount of €8.550 annually
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
Profits of a permanent establishment abroad unless the permanent establishment directly or indirectly engages more than 50% in activities which lead to investment income and the foreign tax burden is substantially lower than the tax burden in Cyprus .
The whole amount
Lump sum received by way of retiring gratuity, commutation of pension or compensation for death or injuries.
The whole amount
Capital sums accruing to individuals from any payments to approved funds (eg provident funds)
The whole amount
Profits from the sale of shares, bonds, debentures, founders shares and other securities of companies incorporated in Cyprus or abroad and options thereon
The whole amount
Tax deductions
The following are deducted from income:
Interest paid in respect of rented buildings
The whole amount
Contributions to trade unions or professional bodies
The whole amount
On any rental income
20% of rental income
Loss of current year and previous years
The whole amount
Donations to approved charities with receipts
The whole amount
Social insurance, provident fund, medical fund(maximum 1% of remuneration), pension fund contributions and life insurance premiums (maximum 7% of the insured amount)
Up to 1/6 of the chargeable income
Expenditure incurred for the maintenance of a building in respect of which a Preservation Order is in force
Up to €1200, €1100 or €700 per square meter (depending on the size of the building)
Special Contribution
Gross monthly
emoluments from
employment / pension
Government and semigovernment
employees
and pensioners (1)
Private sector
employees, selfemployed
individuals
and private sector pensioners (2)
€
%
€
0 – 1.500
Nil
Nil
1.501 – 2.500
1,5
nil
2.501 – 3.500
2,5
2,5(minimum €10)
3.501 – 4.500
3,0
3,0
Over 4.500
3,5
3,5
Social grants
The following social grants are given:
Grant of €2.563 per annum for every child receiving full time higher education in Cyprus (with certain restrictions) or full time university education outside Cyprus. Families with more than three children receive additional grant €854.
Non-deductible expenses
The following expenses are not tax deductible:
• Business entertainment expenses including hospitality expenses
of any kind which are incurred for the purpose business
Amount in excess of 1% of the gross of the income or €17.086 (whichever is the lower)
• Private motor vehicle expenses
The whole amount
• Professional tax
The whole amount
• Immovable property tax
The whole amount
• Interest payable or deemed to be payable in relation to the acquisition of a private motor vehicle, irrespective of whether
it is used in the business or not, or other asset not used in the
business. This restriction is lifted after 7 years from the date of
purchase of the relevant asset.
The whole amount
• Contributions to the Social Cohesion Fund
The whole amount
• Expenditure which is not supported by invoices and relevant receipts or other supporting documentation as required by the relevant Regulations
The whole amount
• Wages and salaries relating to services The whole offered within the tax year on which amount contributions to the Social Insurance Fund, Redundancy Fund, Human Resource Development Fund, Social Cohesion Fund, Pension Fund and Provident Fund have not been paid in the year in which they were due, will not be tax deductible for the calculation of taxable income
The whole amount
Capital Allowances
Capital allowances available for companies are also available to individuals who submit audited financial statements to the Inland Revenue.
Personal allowances
The following are deductible from income:
• Social insurance contributions, contributions to approved provident
and pension funds, the General Health Plan, contributions to medical
or other approved funds as well as
insurance premiums in respect
of the life of the claimant.
The whole amount up to 1/6 of the taxable income before this allowance
• The annual life insurance premium is restricted to 7% of the insured amount.
• Life insurance policies, in respect to the life of the claimant’s spouse, which were in existence up to the 31 December 2002 and for which the claimant was receiving a tax allowance, will continue to be deductible by the claimant.
• In the event of cancellation of a life insurance contract within 6 years from the date it was entered into, part of the life insurance premiums already given as an allowance will be taxable as follows:
