Cyprus Personal Income Tax is imposed on the global income (accruing or arising from sources both within and outside Cyprus) of Cyprus tax resident individuals. Non-Cyprus tax residents are taxed only on specific types of income accruing or arising only from sources within Cyprus (e.g. rental income from real estate property located in Cyprus).
Below you can find a summary of the PIT rates, exempt income, deductible and non-deductible expenses currently applicable to individuals.
Personal Income tax rates
Taxable Income | Tax rate | 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* | ||
*35% tax rate being among the lowest in EU
Tax basis
All Cyprus tax resident individuals are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad.
Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.
A tax resident in Cyprus is any individual who spends more than 183 days in any one calendar year in Cyprus.
As of 1 January 2017, an individual may also be considered a tax resident in Cyprus if (s)he satisfies the “60-day rule”. The “60-day rule” applies to individuals for whom all of the below are true in the relevant tax year:
- So not reside in any other single state for a period exceeding 183 days in aggregate;
- Are not considered tax residents by any other state;
- Reside in Cyprus for at least 60 days;
- Have other defined Cyprus ties. To satisfy this condition the individual must carry out any business in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year. In addition, the individual must maintain in the tax year a permanent residential property in Cyprus which it is either owned or rented.
How are the days in and out of Cyprus calculated based on the “183 days rule” and the “60 days rule”?
- The departure day from Cyprus counts as a day of residence outside Cyprus.
- The arrival day 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
Exempt Income
Source of Income | Exemptions | Alert |
Dividend income | The whole amount | dividend income may be subject to Special Contribution for Defence
|
Interest Income
(non-business related) |
The whole amount | Interest income may be subject to Special Contribution for Defence |
Foreign exchange gains | The whole amount | Persons trading in FX have an option to make an irrevocable election to be subject to tax only on realised
FX differences |
Profits from disposal of
Securities (note 1) |
The whole amount | |
Profits from the production of films, series and other related audiovisual programs | The lower of 35% of the eligible expenditure and
50% of the taxable income |
Any restriction may be carried forward for 5 years. |
Profits of a foreign permanent establishment | The whole amount | With effect as from 1 July 2016, taxpayers may elect to tax the
With effect as from 1 July 2016, taxpayers may elect to tax the profits earned by a foreign permanent establishment, with a tax credit for foreign taxes incurred on those foreign permanent establishment profits. Transitional rules apply in certain cases on the granting of foreign tax credits where a foreign permanent establishment was previously exempt and subsequently a taxpayer elects to be subject to tax on the profits of the foreign permanent establishment tax on the profits of the foreign permanent establishment. |
Profit from Restructuring a qualifying loan
|
The whole amount | |
Capital gain from the disposal of
intellectual property rights under the IP regime |
The whole amount | |
Remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment,
exemption applies for a period of 10 years for employments commencing as from 1 January 2012 provided that the annual remuneration exceeds €100.000. For employments commencing as from 1 January 2015 the exemption does not apply in case the said individual was a Cyprus tax resident for 3 (or more) tax years out of the 5 tax years immediately prior to the tax year of commencement of the employment nor in the preceding tax year. I n certain cases it is possible to claim the exemption where income falls below €100.000 per annum. The Minister of Finance has announced the intention of the government to introduce amendments to the 50% exemption commencing as from year 2022, including lowering the minimum salary to €55.000 and increasing the years of the exemption to 17 |
||
Remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the
commencement of the employment. The exemption is available for a period of years for employments commencing during or after 2012 and it applies from the tax year following the year of commencement of the employment, with the last eligible tax year being 2030. This exemption may not be claimed in addition to the immediately above mentioned 50% exemption for employment income |
20% of the remuneration
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 | |
Lump sum received by way of retiring gratuity,
commutation of pension or compensation for death or injuries |
The whole amount | |
Lump sum repayment from life insurance schemes or approved
provident funds |
The whole amount | |
Rent from a preserved building | The whole
amount |
|
Capital gain from the disposal of intellectual property rights under the IP regime | The whole
amount |
Pension income from services rendered abroad
Pension income of any individual resident in the Republic, which arises from services rendered abroad, is taxed at a flat rate of 5% for amounts exceeding €3.420 per annum. The taxpayer has the right to choose to be taxed either under the special mode of taxation as stated above or under the personal income tax rates If the latter is chosen, the
pension is added to the individual’s taxable income.
Widow’s pension
Total amount of widow’s pension received from the Social Insurance Fund and/or other approved pension funds is taxed at a flat rate of 20% on amounts exceeding €19.500. The taxpayer can however elect to be taxed in accordance with the personal income tax rates (page 3). In this case, the pension is added to the individual’s taxable income
Deductible expenses
Expenses deducted from income | Deductions | Alert |
Contributions to trade unions or professional bodies | The whole
amount |
|
Social Insurance, General Health System medical fund, private medical
fund insurance contributions (maximum 1,5% of remuneration), pension and provident fund contributions (maximum 10% of remuneration) and life insurance premiums (maximum 7% of the insured amount) |
Up to 1/5 of the chargeable
income |
|
Loss of current year and previous years | The whole
amount |
For individuals required to
prepare audited financial statements, current year losses and losses of the previous five years only may be deducted |
Expenses for letting of buildings | 20% of gross rental income | |
Donations to approved charities (with receipts)
|
The whole
amount |
Without receipts donations up to €300 |
Donations to political parties
|
Up to €50.000 | Subject to conditions |
Expenditure for the maintenance of buildings under preservation order | Up to €1.200, €1.100 or
€700 per square meter |
depending on the size of
the building |
Amount invested each tax year as from
1 January 2017 in approved innovative small and medium sized enterprises either directly or indirectly (applicable up to 30 June 2021) |
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% |
Wear and tear allowances
Individuals carrying on a business are allowed to deduct wear and tear allowances on assets used in the business from their taxable income.
Non-deductible expenses
The following expenses are not deductible in calculating the taxable income of a self-employed individual:
Expense | Non-deductible |
Expenses not incurred wholly and exclusively for the production of taxable income | The whole amount |
Expenditure not supported by appropriate documentation | The whole amount |
Business entertainment expenses | Amount in excess of 1% of the
gross income or €17.086 (whichever is lower) |
Private motor vehicle expenses
|
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 ceases after 7 years from the date of acquisition of the relevant asset. |
The whole amount |
Wages and salaries relating to services offered within the tax year on which social insurance and other contributions have not been paid in
the year in which they were due. |
The whole amount |
Notes:
The term “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon. Securities, among others, cover options on Securities, short positions on Securities, futures/forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRs, GDRs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Repos on Securities, units in open-end or close-end collective investment schemes. Specific types of participation in foreign entities which are considered as Securities.
For more information on the Cyprus Income Tax, please contact us at info@savvacyprus.com. We would be happy to assist you.