Cyprus Personal Tax Review

Date of last update: 1 January 2015

Introduction

All Cyprus tax residents are taxed on their worldwide income, accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed 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 one calendar year. Days in and out 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 on the same day counts as one day of residence in Cyprus;
  • Departure and arrival in Cyprus on the same day counts as one day of residence outside Cyprus.

Personal Tax Rates

Chargeable

Income Euro

Tax
 Rates
%

Tax
  Amount

Cumulative Tax
                                          €

0 - 19.500

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

60.000 and over

35

   

Foreign pensions are taxed at the rate of 5%. An annual exemption of €3.420 is granted.

Exemptions

The following are the most important exemptions from income tax:

  • Interest income

100%

  • Dividend income

100%

  • Profits from sale of securities*

100%

  • Deposits with housing finance corporation*

40%

  • Remuneration from salaried services rendered outside Cyprus to a permanent establishment abroad or to a foreign employer for more than 90 days in a tax year

100%

  • Remuneration from any office or employment of an individual in Cyprus provided that he/she was not resident in Cyprus before the commencement of the employment (applicable for 3 years commencing from 1st of January following the year of commencement of the employment)

20%
of remuneration
or 8.550
(the lower)

  • Remuneration from any employment exercised in the Republic by individuals who were based overseas and who were not Cyprus tax-residents before the commencement of their employment in Cyprus. The exemption applies for a period of 5 years starting from the first year of employment provided that the annual remuneration of the employee exceeds €100.000.

50%
of the
remuneration

  • Profits from a permanent establishment abroad*

100%

  • Rent from building in respect of which there is a Preservation Order

100%

  • Widows Pension

100%

  • Capital sum received by way of retiring gratuity, commutation of pension or compensation for death or injuries

100%

  • Capital sums accruing to individuals from any payments to approved funds (e.g. provident funds)

100*

  • *Under certain conditions
 

Tax Deductions

The following are allowable deductions:

  • Contributions to trade unions or  professional bodies;
  • Loss of current year and previous years (only in cases of audited financial statements and maximum 5 years old);
  • 20% of rent receivable;
  • Contributions and donation to approved charities (with receipts);
  • Up to 1/6 of the chargeable income for social insurance, provident fund, pension fund contributions and life insurance premiums (the allowable annual life insurance premium is restricted to 7% of the insured amount);
  • Deductions for expenditure for a building in respect of which there is in force a Preservation Order (1.200, 1.100, 700 per square meter depending on the size of building);
  • Business entertainment expenses (1% of revenue capped to €17.100).

Social Insurance Contributions

Employees, as explained in company taxes section, contribute to the Social Insurance Fund 7.8% of their gross salary which is deducted from their employer before they get paid.

The contributions of self-employed persons are 14.6% of income. The amount of the contributions is subject to a lower and a maximum limit, depending on the profession or trade of the self-employed Person.

Submission of Tax Returns

The deadline for employees to submit to tax authorities their personal return (IR1) is the 30th day of April of the following taxable year when submitting a manual form and the 31st day of July of the following taxable year in case the form is being submitted electronically. 

Since the 2006 tax year and onwards, self-employed persons with an annual turnover more than €70.000 are obliged to prepare audited financial statements and they can submit their personal return up to the 31st of March following the next year of the taxable year (the 31st March 2015 is the deadline for the submission of personal tax return for the year 2013). For self-employed persons who do not prepare audited financial statements, the deadline is the 30th of June following the taxable year.
 

Legal Disclaimer
The information in this report is for information purposes only. It is not intended to constitute tax, legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. We accept no responsibility for any errors, omissions or misleading statements in this report, or for any loss which may arise from reliance on materials contained in this report. 

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