Personal Income tax

PERSONAL INCOME TAX

The Cyprus taxation scheme for individuals is composed of an income tax applied on income earned or accrued in Cyprus on worldwide income. An individual is considered a Cyprus tax resident if he/she spends more that 183 days in the country in any one calendar year. Non Cyprus tax residents are taxed only on the income accrued or derive from sources in Cyprus.
 
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.
 

Personal Income Tax Rates for 2019:

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
36.301 -  60.000
30
10.885
60.000 and over                 
35
 
 
Foreign pensions from services rendered abroad
 
Pension income of tax resident individual in Cyprus, from services render abroad is taxed at the rate of 5%. An annual exemption of €3.420 is granted. The taxpayer may opt to be taxed in the normal way, where this special mode of taxation of income results to a higher tax liability (this selection can be made from year to year).
 

Exemptions

 The following are exemptions from income tax:
(SDC means Special Defence Contribution)
Type of income
Exemption Limit 
Interest
The whole amount but subject to SDC at 30%
Dividends
The whole amount, but subject to SDC at 17%
Remuneration from any office or employment exercised in Cyprus by an individual who was not a Cyprus tax resident before the commencement of his employment. This exemption applies for a period of five years commencing from 1 January of the year following the year of commencement of such employment. This exemption applies for tax years up to and including 2020. In case a 50% exemption (see below) is claimed, the 20% exemption does not apply.
20% of income with a maximum amount of €8.550 annually
Remuneration exceeding €100.000 per annum from any office or employment exercised in Cyprus by an individual who was a tax resident outside Cyprus prior to the commencement of employment. This exemption applies for the first 10 years of employment. The 50% exemption is not available to individuals whose employment commenced on or after 1 January 2015 if such individuals were:
  • tax residents of Cyprus for a period of 3 out of 5 years preceding the year of employment
  • tax residents of Cyprus in the year preceding the year of commencement of employment
 
50%
Remuneration from salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus employer
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
Profits of a permanent establishment abroad under certain conditions
The whole amount
Lump sum received by way of retiring gratuity, pension or death or injuries
The whole amount
Capital sums from approved funds (eg. provident fund)
The whole amount
Deposits with Housing Finance Corporation
40 percent of the amount deposited
Capital gains from the sale of immovable property
The whole amount
Profits from the sale of securities
The whole amount
 
 

Tax deductions

The following are deducted from income:
 
Type of Income
 

Exemption Limit
Donations to approved charities (with receipts)
The whole amount
Contributions to trade unions or professional bodies
The whole amount
Rental Income
20% of rental income
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
Expenditure incurred for a preserved building
Up to €342, €513 or €598 per square meter (depending on the size)
Social Insurance, provident fund, medical fund, pension fund contributions and life insurance premiums (the allowable annual life insurance premium is restricted to 7% of the insured amount)
Up to 1/5 of the chargeable income
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).Unused deduction can be carried forward and claimed in the following 5 years, subject to the cap of 50% of taxable income (and overall maximum of €150.000 per year).
Eligible infrastructure and technological equipment expenditure in the audiovisual industry
20%
 

Example of personal Tax computation

-
 
     
Salary
71.000
Rent income
4.000
Interest income
1.800
Dividend income
700
Social insurance contribution
4.243
Life insurance premiums
5.000
Insured sum
70.000
Provident fund contribution
3.500
Donation to approved charities – with receipts
300
 

Tax computation
Salary  
71.000
 
Rent receivable
 4.000
 
Interest receivable         (exempt)
    
   -
 
Dividend income           (exempt)
   
    -
 
Total Income
 
75.000
Less: deductions
 
 
Donations with receipts to approved charities
   
   300
 
20% of rent income
      800
 1.100
Net total income
 
73.900
Restriction of life insurance premiums to 7% of the insured sum( 7%@€70.000=€4.900)
Provident fund, social insurance contributions and life insurance premiums restricted to 1/5 of net total income (€3.500 + €4.243 + €4.900 = €12.643 restricted to 1/5 of €73.900)
 
12.643
 
 
 
Taxable income
 
61.257
 
Income tax payable                               Tax rate
 
 
Up to 0 - 19.500                                           zero
 
zero
 
Between 19.501 - 28.000                            20%
1.700
 
Between 28.001 - 36.300                            25%
2.075
 
Between 36.300 -60.000                             30%
7.110
 
Over 60.000                                                 35%
440
 
Total Income Tax payable   
    
 
10.885
 
 
 
Special contribution for defence
 
 
Dividend income - €700@17%
  
119
 
Interest income - €1.800@30%
  
540
 
Rental income - €4.000@0.75@3%
   
 90
 
  749
Total Income tax to be paid
 
11.634