The main types of taxes applicable to an individual in Cyprus include:

•  Direct taxes (e.g. income tax and special defense contribution),

•  Indirect taxes (e.g. VAT and duties on goods and services) and

•  Capital gains tax (applicable on the sale of immovable property situated in Cyprus)

An individual working in Cyprus is also subject to social insurance (and other) contributions.

For an expatriate individual arriving in Cyprus, it is important to establish the following:

• Tax residency status
• Domicile status
• Sources of income and
• Eligibility for certain tax exemptions

Tax residency

An individual who spends more than 183 days in Cyprus is a tax resident of Cyprus.

As from 1 January 2017 an individual can be a tax resident of Cyprus even if he/she spends less than or equal to 183 days in Cyprus provided that he/she satisfies all the following conditions within the same tax year (1 January – 31 December):

1. Does not spend more than 183 days in any other country;
2. Is not a tax resident of any other country;

iii. Spends at least 60 days in Cyprus;

1. maintains a permanent home in Cyprus that is either owned or rented;
2. carries on a business in Cyprus, is employed in Cyprus or holds an office in a Cyprus tax resident person at any time during the tax year.

If the employment/business or holding of an office is terminated during the year, then the individual would cease to be considered a Cyprus tax resident for that tax year.

For the purpose of calculating the days of residence in Cyprus:

• The day of arrival into Cyprus is considered to be a day in Cyprus
• The day of departure from Cyprus is considered to be a day out of Cyprus
• The arrival in Cyprus and departure from Cyprus on the same day is considered to be a day in Cyprus and
• The departure from Cyprus and return to Cyprus on the same day is considered to be a day out of Cyprus.

A Cypriot tax resident individual is subject to income tax on income accruing or arising from sources both within and outside Cyprus, i.e. on their worldwide income.

A non-Cypriot tax resident individual is subject to income tax only on income accruing or arising from sources in Cyprus.

Personal income tax rates
The personal income tax rates applicable to an individual’s taxable income are as follows:
Taxable Income Tax Rate Cumulative Tax

€	%	€
0 – 19,500	0	0
19,500 – 28,000	20	1,700
28,000 – 36,300	25	3,775
36,300 – 60,000	30	10,885
60,001 and over	35

Exemptions/ deductions
The following are exempt from income tax:
• 50% of the remuneration from any employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of his/her employment in Cyprus. The exemption applies for a period of ten years starting from the first year of employment provided that the above income of the employee exceeds €100,000 per annum.
This exemption does not apply in case the employee was a Cypriot tax resident in the preceding tax year or for at least three out of the last five tax years immediately prior to the tax year of commencement of employment.
• 20% of the remuneration or €8,550 (whichever is the lower) from any employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of his/ her employment. This exemption applies for a period of five years from 1 January following the year of commencement of the employment and may be claimed up to tax year 2020.
• All interest income
• All dividend income
• All gains arising from the disposal of securities such as shares and bonds
• Remuneration from the rendering of salaried services to a non-resident employer based outside of Cyprus or to an overseas branch of a resident employer for an aggregate period in the year exceeding 90 days
• Any lump sum received as a retiring gratuity, commutation of pension, death gratuity or as consolidate compensation for death or injury
• Any lump sum repayment from life insurance schemes or from approved provident funds. Amongst other items of expenditure, the following are deductible for income tax
purposes:
• Contributions to approved provident funds
• Subscriptions to trade unions or professional bodies
• Donations to approved charitable organisations
• Expenses for the letting of buildings up to the 20% of the rental income

Stock options
Stock options granted by employers to their employees are subject to tax as part of the employee’s employment income.
Complex rules apply to the taxation of such options.
Benefits-in-kind
A number of benefits-in-kind are subject to taxation in Cyprus:
• Accommodation
• Use of a car
• Relocation allowances
(subject to a tax-free de minimis)
• Allowances provided for child education
Special defense contribution
A Cypriot tax resident individual who is domiciled in Cyprus is subject to special defense contribution to the following
sources of income at the rates indicated below.

Source of income	SDC rate
Dividends	17%
Interest	30%
Interest from Cyprus Government bonds and saving certificates	3%
Rental income	2.25%

Non-Cypriot tax residents and Cypriot tax residents who are not domiciled in Cyprus are exempt from special defense contribution. Therefore, a non-Cypriot domiciled individual who relocates to Cyprus, would be exempt from special
defense contribution, even if he/she spends more than 183 days in Cyprus in a tax year.
Domicile
An individual is domiciled in Cyprus if he/she has a Cypriot domicile of origin, subject to a few exceptions.
An individual’s domicile of origin is the country that his/her father (or in certain cases his/her mother) treats as his (her)
permanent home (domicile), at the time of the individual’s birth.
Irrespective if one has a domicile of origin outside of Cyprus, he/she will be deemed to be domiciled in Cyprus if he/she has
been a Cypriot tax resident for at least 17 out of the last 20 years prior to the relevant tax year.
Capital gains tax
Subject to certain exceptions, capital gains tax (CGT) is imposed on gains from the direct or indirect disposal of immovable property situated in Cyprus at the rate of
20%.
Immovable property includes shares of companies not listed on a recognized stock exchange that own immovable property
situated in Cyprus
Estate duty, wealth tax and inheritance tax
There is no estate duty, wealth tax or inheritance tax in Cyprus.
Foreign pension income
An individual who is a Cypriot tax resident can choose one of two methods for the taxation of pension payments received
from a pension fund in relation to employment of the individual whilst that person was outside Cyprus:
• The first €3,420 is tax-free with the remainder of the payments subject to tax at the flat rate of 5%; or
• The income is added to other taxable income and taxed at the normal income tax rates noted above. The tax liability calculated under either option is reduced by any available foreign tax credit relating to any tax deducted at source from the pension payments.
VAT
Value added tax is levied at the rate of 19%. Reduced VAT rates of 5% and 9% apply to some goods and services.
Registration of employees
An individual should register with the Tax Department and submit personal income tax returns if they earn taxable income in Cyprus exceeding the tax-free amount of  €19,500 per annum. An Alien Registration Certificate, a “yellow slip” and a copy of the individual’s passport is required to register. An individual working in Cyprus should register with the Social Insurance Department and make social insurance contributions (see the next page for further details). An Alien Registration Certificate, a “yellow slip” and a copy of the individual’s passport is required to register.
An exemption from registration may be granted if the individual is an EU national and wishes to continue paying social security contributions in their home country.
A tax clearance certificate may be obtained by an individual upon their exit from Cyprus and also for renewal of work permits (where applicable).
Tax returns and due dates
An individual working in Cyprus, earning above the tax-free amount of €19,500 should submit an annual income tax return (IR1) every year. The due date is 30 April following the tax year if the return is submitted manually.
An extension to 31 July is granted if the return is submitted electronically.
Foreign interest and dividends received where special defense contribution has not been deducted at source but is applicable, is due by 30 June for the first half of the year in which the interest and dividends are received and by 31 December for the second half of the year in which interest and dividends are received.