In a Nutshell: Personal Income Tax in Cyprus

Understanding the intricacies of personal income tax in Cyprus can seem daunting, but it doesn't have to be. Whether you're a resident or a non-resident, knowing how the system works is crucial for effective tax planning and compliance. Let's break down everything you need to know about personal income tax in Cyprus in a clear and concise manner.

Basis of Taxation

In Cyprus, tax residency is determined by the amount of time an individual spends in the country. If you spend more than 183 days in Cyprus within a calendar year, you are considered a tax resident. Alternatively, under the 60 day rule you can also qualify as a tax resident if you spend at least 60 days in Cyprus, do not reside in another country for more than 183 days, and have significant ties to Cyprus, such as employment or business activities.

Tax residents are taxed on their worldwide income, while non-residents are only taxed on income derived from sources within Cyprus.

Personal Income Tax Rates

Cyprus employs a progressive tax system with varying rates depending on your income bracket. The taxable income for the purposes of this calculation is determined after allowances and deductions.

First €19,500: Nil
€19,501 - €28,000: 20%
€28,001 - €36,300: 25%
€36,301 - €60,000: 30%
Over €60,000: 35%

For example, if your annual taxable income is €50,000, your tax calculation would be as follows:

First €19,500: €0
Next €8,500 (€19,501 - €28,000): €1,700 (20%)
Next €8,300 (€28,001 - €36,300): €2,075 (25%)
Remaining €13,700 (€36,301 - €50,000): €4,110 (30%)
Total tax payable: €7,885

Exemptions and Deductions

Several income types are exempt from personal income tax in Cyprus, including interest (except from ordinary business activities) and dividends. Additionally, you can benefit from various deductions, such as contributions to social insurance, the national health scheme, medical and life insurance and contributions to pension/provident fund schemes (subject to certain limitations), trade unions or professional body subscriptions and donations to approved charities.

Other allowable deductions include 20% of gross rental income plus any applicable wear and tear allowances.

In total these contributions are allowable up to 1/5 of earned income.
Individually, life insurance premiums are allowable up to 7% of the insured amount.
Individually, medical insurance premiums are allowable up to 1,5% of earned income.

Special Tax Regimes

Cyprus offers favorable tax rates for specific income types:

Foreign pension income is taxed at a flat rate of 5% on amounts over €3,420.
Cyprus source widow(er)'s pension is taxed at a flat rate of 20% on amounts over €19,500.

Moreover, individuals who take up first employment in Cyprus and earn over €55,000 annually can benefit from a 50% tax exemption on their remuneration for up to 17 years, whilst a 20% deduction (up to €8.550) is available if income is less than €55.000 for 5 years (applies up to 2025).

Tax Compliance and Deadlines

Staying compliant with tax regulations in Cyprus involves adhering to several key deadlines:

For employees

The employer is obliged to deduct the relevant proportion of income tax (PAYE) at the of each month and make the payment by the end of the following month.

For self-employed individuals

The following deadlines exist:

31 July: submission of provisional income tax return
31 August: payment of the first instalment of the year’s provisional tax.
31 December: submission of any amendments to provisional tax
31 January of the following year: payment of the second (last) instalment of the provisional tax for the previous year.
31 July of the following year: settlement of any residual tax arising from the final tax return.

Failure to meet these deadlines can result in penalties and interest charges.

For companies and businesses

The following deadlines exist:

31 July: submission of provisional income tax return
31 August: payment of the first instalment of the year’s provisional tax.
31 December: submission of any amendments to provisional tax
31 January of the following year: payment of the second (last) instalment of the provisional tax for the previous year.
31 July of the following year: settlement of any residual tax arising from the final tax return.

Personal Tax Returns are normally filed 9 or 10 months after the end of the financial year, but the Tax Department announces the deadline for each year. Self employed persons may have different deadlines. Failure to meet these deadlines can result in penalties and interest charges.

In a Nutshell

Navigating the personal income tax system in Cyprus doesn't have to be complicated. By understanding the basis of taxation, tax rates, exemptions, deductions, and compliance deadlines, you can manage your tax obligations effectively.

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