The Cyprus Tax Department announced today that a new law (50% income tax rate) granting income tax exemptions to non-residents of Cyprus has been enacted. The law, which has retroactive effect from January 1, 2022, will apply to personal income tax declarations for the year 2022 onwards.
To facilitate the process, the Tax Department will soon make available a downloadable tax form on the Taxisnet system. The public will receive updates regarding the start of the income tax declaration filing period through press releases and emails.
The income tax exemptions apply to individuals who were non-residents of Cyprus for at least 15 years before their initial employment in a job in Cyprus, provided their annual income exceeds €50,000. Previously, the threshold was set at €100,000.
Eligible individuals working in Cyprus will only be taxed on 50% of their declared income. However, the first €19,500 is not taxable. €19,501-€28,000 is taxable at the rate of 20%; €28,001-€36,300 is taxable at a rate of 25%; €36,301-€60,000 at 30%, and 35% at €60,001+.
This initiative is part of the government’s strategy to continue to attract highly skilled professionals and to also continue to encourage foreign companies, including IT firms, to establish their headquarters in Cyprus. Yet to really be attractive, one would probably need to earn closer to €100,000 to realise any significant income tax benefit, given the first €19,500 is 0% tax.
The income tax exemption (50% income tax rate) is applicable for a maximum duration of 17 years. However, if an individual’s income falls below €50,000 during any year of their employment in Cyprus, they will not qualify for the tax exemption for that specific year.
Note: The deadline for filing income tax declarations and making tax payments for 2022 is October 2, 2023.
