Tax relief for non-residents taking up employment in Cyprus
Tax relief for non-residents taking up employment in Cyprus
The case
In an effort to provide incentives to foreigners to come to work in Cyprus, the Cyprus House of Representatives voted into law numerous anticipated tax law amendments.
20% exemption
Employees are exempt from income tax on 20% of their remuneration or €8,550 (whichever amount is lower) for employment exercised in Cyprus. This exemption is applicable to individuals who were not Cyprus tax residents during the year preceding the year of commencing employment in the Republic.
The exemption is applicable from the 1st of January of the year which follows the year in which the employment commenced. It should be noted that:
- For employment which began during any year until 2011, the exemption is granted only for 3 years;
- For employment which began from 2012 onwards, it is granted for 5 years. The exemption can be claimed until 2020 when the scheme will expire.
50% exemption
A 50% exemption on the remuneration from any employment exercised in Cyprus if such remuneration exceeds €100,000 annually is offered. The exemption is applicable irrespective of whether during one year the income falls below €100,000 provided that at the commencement of working in Cyprus, the income from employment in the Republic exceeded the €100,000 threshold and the Commissioner is satisfied that the fluctuations in the salary are not artificially engineered for the purpose of obtaining the relevant tax exemption.
The exemption has certain restrictions. Individuals who were tax residents in Cyprus during any 3 out of 5 years preceding the year of employment (not applicable for individuals with a commencement of employment between 2012 to 2014) as well as during the year preceding the year of employment will not be granted the exemption.
The exemption can be claimed for 10 years.
Note
An individual will not be entitled to both exemptions simultaneously.