Areas of Practice

Personal Income Tax

Individual tax resident of Cyprus is an individual who stays in the Republic for 183 days in the year of assessment. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. On the contrary, all individuals who are non-tax residents, will be taxed only on income earned in Cyprus.

(a) Income tax rates
The following tax rates apply:

  • • Foreign pensions are taxed at the rate of 5%, while an annual exemption of Euro 3,417 is granted.

  • • Moreover, 20% exemption of emoluments or Euro 8,543 whichever is the lowest, is granted in the case of non-residents starting employment in the Republic, for a period of 3 years after the 1st of January following the year of commencement of the employment.

 

(b) Tax on dividends
Dividends are exempt from income tax. Subject to certain conditions, dividends are subject to special contribution for the defence at the rate of 15%, applicable only to residents.

(c) Tax on interest
The total interest income derived by individuals is not subject to income tax in Cyprus. Interest income from saving bonds, development bonds, deposits with housing finance corporation and provident fund is subject to special contribution for the defence.

(d) Tax treatment of losses
The losses of current year, as well as that of previous years, are deducted from the taxable income, subject to certain conditions.

(e) Profits of permanent establishments abroad
The profits of permanent establishments abroad are exempt from tax under certain conditions.

(f) Disposal of securities
Profits gained from the sale of securities listed on a recognised Stock Exchange are exempt from tax for all companies. Securities include shares, bonds, debentures, founders' shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon.

(g) Remuneration by services rendered abroad
Salary earned abroad, by rendered services to a non-Cyprus resident employer or foreign permanent establishment of a Cyprus resident employer, for a period of more than 90 days in a tax year, is not subject to tax.

(h) Other income
Income received in the form of retiring gratuity, compensation for death or injuries, provident fund, pension fund, or other approved funds, is exempt from tax.

(i) Deposits to Housing Finance Corporations
40% of the amount deposited to the Housing Finance Corporations is exempt from tax; given that the deposit amount does not exceed the 25% of the individual's total income. The exemption applies only for the deposit schemes that existed as at 30 April 2003.