Tax relief for expatriates in Cyprus

On top of the already attractive tax rates for expatriates in Cyprus, further tax relief is available. A 50% deduction available to those who earn employment income of more than EUR 100,000 a year or a 20% deduction available to those earning less than EUR 100,000.

A tax resident of Cyprus may receive a 50% tax deduction on personal income tax if the below conditions are met:

Not a tax resident of Cyprus in the previous tax year;
Not a Cyprus tax resident for any three out of the last five tax years prior to commencement of employment in Cyprus, and
Have employment income exceeding EUR 100,000.

The deduction will be granted for 10 years, so long as the annual gross employment income exceeds EUR 100,000. The term ‘gross emoluments’ includes, but is not limited to, the following: annual gross salary as a result of the individual’s employment in Cyprus, bonuses, benefits in kind or any other type of income directly related to employment in Cyprus.

If the annual gross employment income drops below EUR 100,000, the 50% deduction will not apply. In this case, the 20% deduction may apply instead – this is limited to the lower of 20% of emoluments or EUR 8,550 per annum.

Since 2012, the deduction was for five years and commenced on the 1st of January in the year following the start of employment. Applications for the 20% deduction were meant to end at the close of the year 2020, however a draft bill providing for its extension for an additional five years has been put before Parliament. If passed, this will effectively mean that qualifying persons may apply for the relief up until 2025 and, if successful, receive the deduction for a duration of ten years from the commencement of the employment.

Angelos Petrou
apetrou@bdo.com.cy