Income Tax For Individuals

Resident in Cyprus
On 14 July 2017, the House of Representatives approved an amendment to the Income Tax Law that extends the definition of “Cyprus tax resident individual”. The amendment applies retroactively as from 1 January 2017. According to the legislation, an individual who spends more than 183 days in Cyprus is considered Cyprus tax resident. With the amendment to the legislation and the introduction of a new “60-day” rule, an individual who does not satisfy the above condition may still be deemed to be Cyprus tax resident if he/she:satisfies all of the following conditions within the same tax year:

i.does not spend more than a total of 183 days in any other country within a tax year and is not a tax resident of another country within the same tax year,and the following three conditions are met:

ii. The individual must remain in Cyprus for at least 60 days in the tax year

iii. The individual must carry on a business in Cyprus, be employed in Cyprus or hold an office in a Cyprus tax resident person at any time during the tax year

If the employment/business or holding of an office is terminated during the year, then the individual would cease to be considered a Cyprus tax resident of the Republic at any time during the tax year.

Tax rates
The tax rates that apply to individuals for the tax year 2024 are as follows:

YEAR 2024

Taxable Income			Tax rate	Amount of 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
36.001	-	60.000	30	7.110	10.885
60.001 and above			35

Exempt income
The main exemptions are as follows:

Dividends received are exempt from income tax (see also for Special Contributions for Defence Law provisions).
Profits of a permanent establishment situated outside Cyprus of a Cypriot resident are exempt from tax. This exemption does not apply if the permanent establishment engages more than 50% in activities, which lead to investment income, and the foreign tax burden on the income of the permanent establishment is substantially lower than the tax burden of the Cypriot resident in the Republic.
The profit from the disposal of securities is exempt from tax irrespective of whether it is of capital or trading nature. Securities include shares, government stocks, debentures, bonds, founder’s shares and rights thereof.
The whole of interest income. Interest income, which is received in the ordinary course of a business, including interest closely connected to the ordinary course of business, is not exempt but is included in the taxable income of the business (see also, special contribution for defence law provisions in relevant section above).
The lower of 20% of the first employment* remuneration and €8.550**;
- For employments which commenced between 26 July 2022 and 31 December 2027, by a person who was employed outside the Republic by a non-Cyprus resident employer for three consecutive years immediately before the commencement of the persons employment in the Republic.
  
  The exemption is granted for seven tax years, starting from the tax year following the tax year of commencement of the first employment in the Republic.
  
  An individual is considered to have first employment in the Republic when for the first time, after a period of 15 consecutive tax years, during which he/she was not providing any salaried services in the Republic, starts to provide salaried services in the Republic to a Cypriot or to a non-Cypriot employer.
- For employments which commenced between 01 January 2012 and 25 July 2022, by a person who was resident outside the Republic before the commencement of his/her employment in the Republic.
  
  The exemption is granted for five tax years, starting from the tax year following the tax year of commencement of the first employment in the Republic.
The 50% of the first employment* remuneration exercised in the Republic, by a person who was not resident of the Republic for at least 15 consecutive years immediately before the commencement of the person’s first employment in the Republic;
- For employments commenced from 01 January 2022 onwards, and the emoluments of which were exceeding €55.000.
  
  This exemption is granted for 17 tax years, starting from the tax year of commencement of the first employment in the Republic.
- For employments which commenced prior to 01 January 2022, previously granted the 50% exemption under Article 8(23)
- For employments which commenced between 01 January 2016 and 31 December 2021, previously granted the 50% exemption for emoluments exceeding €100.000 (under Article 8(23)).
- For employments not exceeding €55.000, which commenced between 01 January 2016 and 31 December 2021, and up to 25 January 2023 the emoluments exceed the €55.000 per year.
The emoluments from salaried services performed abroad for an aggregate period in the tax year exceeding 90 days, for a non resident employer.
Rental Income which derives from preserved buildings (under certain conditions).
The lump sum amount received from insurance schemes or any approved provident fund as repayment or as retiring gratuity.
Income from scholarship or other educational endowment.
Capital gain from the disposal of intellectual property rights.

* First employment is considered when for the first time, after a period of 15 consecutive tax years, during which a person was not providing any salaried services in the Republic, starts to provide salaried services in the Republic.

** Subject to conditions

Deductions
The following are deducted from income:

Interest relating to the acquisition of fixed assets used in the business.As of 01/01/2012, interest incurred in connection with the acquisition of shares in a 100% owned subsidiary company is deductible, provided that the assets of the subsidiary do not include assets not used in the business.
Expenses for letting of buildings - 20% of the rental income.
Interest in respect to the acquisition of a building for rental purposes.
Subscriptions to trade unions or professional bodies.
Expenditure for the maintenance of buildings under preservation order up to €700, €1.100 or €1.200 per sq. m. (depending on the size of the building).
Donations to approved charitable organisation (with receipts).
Donations to political parties up to €50.000. (subject to conditions)
Special Contribution of employees in the private sector.
The 80% of profits deriving from the disposal/exploitation of intellectual property rights (subject to conditions).
Expenditure incurred for the acquisition of shares in an innovative business. (subject to conditions)
Up to 20% of expenditure incurred on film infrastructure and technological equipment. (subject to conditions)
Up to 50% of the investment in an innovative small/medium sized entity (subject to conditions).
Up to 20% of expenditure for scientific research, and for Research & Development, if incurred during the years 2022-2024 (subject to conditions).

Non-deductible expenses
The following expenses are not tax deductible:

Business entertainment expenses including hospitality expenses of any kind which are incurred for the purpose of the business of any amount in excess of 1% of the gross income or €17.086 (whichever is the lower).
Private motor vehicle expenses.
Immovable property tax.
Professional tax.
Interest payable or deemed to be payable in relation to the acquisition of a private motor vehicle, either it is used in the business or not, or other asset not used in the business. This restriction is lifted after 7 years the relevant asset.
Expenditure which is not supported by invoices and relevant receipts or other supporting documentation as required by the relevant Regulations.
Expenditure not incurred wholly and exclusively for the production of income.
The amount of wages and salaries relating to services offered within the tax year on which contributions to the Social Insurance Fund, Redundancy Fund, Human Resource Development Fund, Social Cohesion Fund, Pension Fund and Provident Fund have not been paid in the year in which they were due. In case those contributions are paid in full within 2 years following the due date, such wages and salaries will be tax deductible in the tax year in which they are paid.

Loans or financial facilities provided to company directors or individual shareholders
Any amount provided as financial assistance or as a loan to a company's director, or to a company's individual shareholder, or to his/her spouse, or to any relative up to a second degree is considered as a monthly benefit equal to 9% p.a. calculated on the above amount. Such benefit will be included in the individual's income and will be subject to Income Tax.

Losses
Carry forward of losses
Losses are carried forward for relief over the next 5 year period. Tax losses from tax year 2018 can be transferred and used until 2023. Any losses up to the tax year 2018 will not be available to offset 2024 profits.

Where a person, including a partnership, converts his business into a limited liability company, any unrelieved losses can be transferred to the new company with the restriction of 5 year period.

Loss of a permanent establishment outside the Republic
Losses arising from a permanent establishment maintained outside the Republic can be offset against profits arising in the Republic. However, when a profit arises from such a permanent establishment, an amount equal to the losses that have been utilised in the past against profits arising in the Republic will be included in the taxable income.

Personal Allowances
The following are deductible from income:

Social insurance contributions, contributions to approved provident and pension funds, contributions to medical or other approved funds as well as insurance premiums in respect of the life of the claimant

The whole amount up to 1/5 of the taxable income before the deduction of these allowances

Donations to approved Charities, with Receipts.
Subscriptions to professional associations.
The annual life insurance premium is restricted to 7% of the insured amount
Life insurance policies, in respect to the life of the claimant’s spouse, which were in existence up to the 31 December 2002 and for which the claimant was receiving a tax allowance, will continue to be deductible by the claimant.
In the event of cancellation of a life insurance contract within 6 years from the date it was entered into, part of the life insurance premiums already given as a allowance will be taxable as follows:

- cancellation within 3 years 30%
- cancellation between 4 to 6 years 20%

Tax credit for foreign tax paid

Any tax suffered abroad on income subject to income tax will be credited against any income tax payable on such income irrespective of the existence of a double tax treaty.

Foreign Pensions
Individuals receiving foreign pension can choose to be taxed on the following way:

Up to € 3.420 0%.
Over € 3.420 5%.