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 2017:
 

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
60.001 and over                  
30
35
10.885

 
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.
 
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 commencement of employment (provided the employment started during or after 2012). This exemption applies for tax years up to 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
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 1/6 of the chargeable income

 
Example of personal Tax computation                                                                        
 

 
      
Salary
71.000
Rent income
4.000
Interest income
1.800
Dividend income
700
Social insurance contribution
3.300
Life insurance premiums
5.000
Insured sum
70.000
Provident fund contribution
3.500
Donation to approved charities – with receipts
450

 

Tax computation
 
Salary  
 
71.000
 
Rent receivable
 4.000
 
Interest receivable        
       -
 
Dividend income          
       -
 
Total Income
 
75.000
Less: deductions
 
 
Donations with receipts to approved charities
      450
 
20% of rent income
      800
 1.992
Net total income
 
73.008
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 1/6 of net total income (€3.500 + €3.543 + €4.900 = €11.943 restricted to 1/6 of €68.250*)
 
11.375

 

Taxable income
 
54.375
 
Income tax payable                                            Tax rate
 
 
Up to 0 - 19.500                                          zero
 zero
 
Between 19.501 - 28.000                            20%
1.700,00
 
Between 28.001 - 36.300                            25%
2.075,00
 
Over 36.300 -54.375                                  30%
5.422,50
 
Total Income Tax payable       
 
9.197,50
 
 
 
Special contribution for defence
 
 
Dividend income - €700@15%
   105,00
 
Interest income - €1.800@10%
   180,00
 
Rental income - €4.000@0.75@3%
     90,00
   375,00
Total Income tax to be paid
 
9.572,50

 
*Note
 €68.250 is made up of total income including interest and dividend less deductions