Physical Persons

Individuals

 

Tax Basis

 

An individual is tax resident of Cyprus if he/she remains in the Republic for a period exceeding 183 days in a tax year.

Where an individual is a tax resident in the Republic, tax is imposed on income accruing or arising from sources all over the world (both within and outside the Republic).

Where an individual is not a tax resident in the Republic, tax is imposed on income accruing or arising only from sources within the Republic.

The tax rates for individuals are the following:

Taxable income Tax rate Tax

Cumulative amount of tax

%

0 – 19.500

_

_ _
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    

 

In the case of company director or an individual shareholder, or his/her spouse, or any relative up to second degree, receiving a loan or financial assistance (cash withdrawal) from the company, then that person is deemed to have obtained a monthly benefit in kind in equal to 9% p.a. on the above facility. This amount will be included in the individual’s income subject to Income Tax in accordance with Income Tax Law.

 

 

Exemptions

 

The following are exempted from income tax:

  • 20% of any remuneration from employment exercised in the Republic by an individual whose residence was outside the Republic before the commencement of the employment or €8.550 whichever the lower is. The exemption is applicable for 3 years from the 1st of January of the year following the commencement of the employment.
  • 100% of any remuneration earned from the rendering of salaried services outside the Republic to a non-resident employer or to a permanent establishment outside the Republic of a resident employer for a total aggregate period in the year of more than 90 days.
  • 50% of any remuneration earned by a non resident person taking up residence in Cyprus for the purpose of being employed by a Cyprus employer and whose annual income from employment exceeds €100.000 per annum. The exemption is given for 5 years starting from the year of commencement of the employment in Cyprus.
  • 100% of profits from a permanent establishment abroad (under certain conditions).
  • 100% of any dividend income.
  • 100% of any profits arising from the sale of securities.
  • 100% of any interest income.
  • 100% of any lump sum received by way of retiring gratuity or commutation.
  • 100% of any lump sum repayment received from approved provident funds or from life insurance schemes.
  • 100% of widow pensions received from approved pension schemes.

 

 

Non-deductible expenses

 

The following expenses are not deductible from an individual’s income:

  • 100% of professional tax.
  • 100% of immovable property tax.
  • 100% of interest payable or deemed to be payable in relation to the acquisition of a private motor vehicle, irrespective of whether is used for business purposes or not. This restriction applies for a period of 7 years from the date of purchase of the motor vehicle.
  • 100% of private motor vehicle expenses.
  • Any amount of business entertainment expenses in excess of 1% of the gross income or €17.086, whichever is the lower.

 

 

Personal allowances

 

The following allowances are deducted from an individual’s taxable income:

  • 100% of the social insurance contributions as well as contributions to approved Provident Fund schemes and pension funds, contributions to medical or other approved funds provided that
    • the whole amount does not exceed the 1/6 of the taxable income before this allowance is deducted
    • 100% of insurance premiums in respect of life insurances
    • the annual premiums are restricted to 7% of the insured amount

 

In the event of cancellation of life insurance contracts within 6 years from the date it was entered into, part of the life insurance premiums already given as an allowance will be taxable as follows:

–          cancellation within 3 years   30%

–          cancellation between 4 to 6 years    20%

 

 

Losses carried forward

 

Any tax loss incurred during a tax year is carried forward over the next five years from the end of the tax year in which the loss was incurred and set off against future profits. The restriction enters into force from year 2012 (losses of year 2007 onwards).

Individuals who can claim such losses are those who have an obligation to prepare audited financial statements, therefore they are considered to be the individuals with turnover in excess of €70.000.

 

 

Tax credit for foreign tax paid

 

Any tax paid abroad in respect of income taxed in Cyprus under income tax will be allowed as credit against the tax payable on such income in Cyprus irrespective of the existence of a Double Tax Treaty between the countries.