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Tax for Individuals

Tax Exceptions

The following are exempt from income tax:

  1. Interest income (passive interest income maybe subject SDC).
    The entire amount but subject to defence Contribution at 30% if the individual is a Tax Resident and domicile. Most of the times are deductible at source. Cyprus Banks deduct the defence before they affect the bank account.
     

  2. Dividends income. (under SDC section)
    The entire amount but subject to defence Contribution at 17% if the individual is a Tax Resident and domicile. ( If person qualify’ s Non domicile then 0 %).
     

  3. Lump sum received under the shape of bonus on retirement, pension death or as a reimbursement on death or injury.
     

  4. Capital Sum received from insurance or approved provident fund.
     

  5. Capital earned from the sale of immovable property (but subject to Capital Gains Tax).
     

  6. Profits from a sale of shares of securities unless shares of company holding immovable property in Cyprus
     

  7. Compensation from salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer.
     

  8. Tax Exemption for First employment in Cyprus for individuals who were not Tax residents prior to the employment

 

  • 20 % of the remuneration from any employment exercised in Cyprus, with maximum €8.550 by any individual who was not resident of Cyprus prior to the commencement of employment. For the individuals that their employment started before 2012 the 20% tax deduction applies for 3 years starting from the year following the year of employment. For the employments that started 2012 and afterwards the tax exemption applies for 5 years starting from the year following the year of employment. The 20 % tax exemption is valid until 2020 which is the last year that the exemption applies.

  • 50% of the remuneration from any employment exercised in Cyprus, by any individual who was not resident of Cyprus prior to the employment, provided that annual remuneration exceeds €100.000. For the employments that started before 2012 the exemption applies for 5 years starting from the year of employment. As of 2012 and afterwards the exemption applies for 10 years starting from the year of employment.(eligible up to year 2020)

  • Profits of foreign permanent establishment under certain condition

 

Tax Deductions

The following are deducted from income:

  1. Social Insurance, provident fund, medical fund, pension fund contributions, GHS (National Health System) Contributions and life insurance premiums. -The amount that can be deducted is limited to 1/6 of taxable income.
     

  2. Contributions to trade unions or professional bodies. -The entire amount can be deducted.
     

  3. Donations to approved charity foundations (receipts required). -The entire amount can be deducted.
     

  4. Expenditure incurred for the maintenance of listed buildings for which there has to be either a Preservations order or certificate by the Minister of Interior that the expenses are in respect of preservation work for restoring the building. – The amount that can be deducted depends from the size of the building and can be €1200 or €1.100 or €700  per square meter.
     

  5. Amount invested each year as from 1st January 2017 in approved innovative small and medium sized enterprises either directly or indirectly. (up to 50% of taxable income, with maximum €150,000).
     

  6. Loss of current year and previous 5 years for those individuals preparing audited financial statement.
     

  7. Rental income.

The following can be deducted for Rental income.

  • 20% of gross rental income

  • Interest paid for acquisition of the rental income property.

  • 3% on the property value less land cost.

  • 1,70% on gross rental income for GHS (General Healthy System) from 1/3/2019
     

Example:

An individual (called A for example purposes) purchases an apartment for €200.000 plus VAT €38.000. Afterwards A rents the apartment for the amount of €900 per month. In addition, A has a bank loan of €140.000 related to the purchase of the apartment, and the bank loan accumulated interest for the year is €3.000. Furthermore, the developer informs us that the cost of land is estimated to 20% on the purchase price.

 

Calculation of tax deduction

Note:

The taxable income is subject to individual tax rates (see above analysis). If A has no other income in Cyprus the tax to be paid is zero. The only tax that will be paid is the defence tax which is €243 only if Tax Residence of Cyprus and Not Non-Dom qualify tax payer.