Basis of taxation
All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and broad. Individuals who are not tax residents of Cyprus are taxed only on income accrued or derived from sources in Cyprus.
An individual is tax resident in Cyprus if he spends in Cyprus more than 183 days in any year. Days in and out of Cyprus are calculated as follows:
- a. The day of departure from Cyprus counts as a day of residence outside Cyprus.
- b. The day of arrival in Cyprus counts as a day of residence in Cyprus.
- c. Arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus.
- d. Departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus.
Personal tax rates
The following income tax rates apply to individuals:
| Chargeable income(€) |
Tax rate(%) |
Tax(€) |
Accumulated tax(€) |
| 0 - 19.500 |
0 |
Nil |
Nil |
| 19.501 - 28.000 |
20 |
1.700 |
1.700 |
| 28.001 - 36.300 |
25 |
2.075 |
3.775 |
| 36.301 - 60.00 |
30 |
7.110 |
10.885 |
| Over 65.000 |
35 |
|
|
Foreign pension is taxed separately at the rate of 5 percent and an annual exemption of €3.417 is granted. A person may elect in any year to have his/her pension included in his/her chargeable income so as to utilize personal allowances. This would lead to a tax saving where the chargeable income including the pension is less than €25.000.
As from 1st January 2012 a 9% deemed benefit in kind applies to all debit balances and loans of directors, shareholders, spouses and up to second degree relatives of limited liability companies. The aforesaid benefit in kind is taxable in the hands of the above persons and accounted accordingly when arriving at the PAYE of each tax payer. Non residents are outside the scope of this provision.
Exemptions
The following income is exempted from tax:
| Type of income |
Exemption limit |
| Interest |
the whole amount but subject instead to SCD*at the rate of 30% |
| 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 of 3 years commencing from 1 January following the year of commencement of the employment annually. |
20% of income with a maximum amount of €8.543 |
| As from 1st January 2012, individuals who were non tax residence of Cyprus and took up employment in Cyprus after this date, and whose salary is in the excess of €100.000. |
50% allowance on their gross salary for a period of 5 years. |
| 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, computation of pension or compensation for death or injuries. |
the whole amount |
| Dividends. |
The whole amount but subject to SCD* at the rate of 20%
|
| Capital sums accruing to individuals from any payments to approved funds (eg providentfunds) |
the whole amount |
| Deposits with Housing Finance Corporations. |
40 percent of the amount deposited. The amount deposited cannot exceed 25 percent of a person’s total income. This exemption applies for deposit schemes that existed as at 30 April 2003. |
| Contributions to trade unions or Professional bodies |
the whole amount |
* SCD Special Contribution for Defense
** 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. A circular was issued by the Tax Authorities in 2008 further clarifying what is included in the term “securities”. According to the circular the term includes short positions, futures, forwards and swaps where they are in respect of securities and depositary receipts (ADR,GDR). Index participations are considered securities only if they derive from participation. Where it is not certain whether a specific financial instrument falls under any of the categories included in the circular, a request for a ruling may be submitted to the Commissioner of Income Tax.
Tax deductions
The following are deducted from income:
| Type of income |
Exemption limit |
| Loss of current year and previous years |
the whole amount with maximum period of 5 years |
| Profits from the sale of securities** |
the whole amount |
| Rental income |
20% of gross rental income |
| Donations to approved charities (with receipts) |
the whole amount |
Social Insurance, provident fund, medical fund, pension fund contributions and life insurance premiums (the allowable annual life insurance premium is restricted to 7 percent of the insured amount) up to 1/6 of the chargeable income
Social grants
The following social grants are given:
- ► Grant 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 an additional grant.
- ► Grant for blind persons.
- ► Basic child grant and additional child grant for families that have a gross family (applicant, spouse, and children) income below the specified threshold.
The actual amounts of social grants are revised annually and announced at the beginning of each year.
|
