Personal Income Tax – Cyprus Income Tax for Individuals
For a resident in Cyprus, tax is imposed on income accruing or arising from sources both within and outside Cyprus.For a non- resident in Cyprus,tax is imposed on income accruing or arising only from sources within Cyprus.
For individuals a Cyprus resident is one who has been residing in Cyprus for a period or periods greater than 183 days within the Income year.
Tax rates
The Cyprus tax rates that apply to individuals are as follows:
| Taxable Income € | Tax Rate % | Tax € | Cumulative Tax € |
| 0 -19.500 | 0 | 0 | 0 |
| 19.501 – 28.000 | 20 | 1.7 | 1.7 |
| 28.001 – 36.300 | 25 | 2.075 | 3.775 |
| 36.301 and over | 30 |
Exemptions
The following are exempt from income tax:
| Widows pension granted under the Cyprus Social Insurance Laws or in accordance with any pension scheme approved under Cyprus regulations |
whole amount |
| Lump sum received as retiring gratuity, commutation of pension, death gratuity or as consolidated compensation for death or injury |
whole amount |
| Lump sum repayment from life insurance schemes or from approved provident funds | whole amount |
| Interest income. Interest income arising in the ordinary course of business, including interest closely connected with the carrying on of the business, is not considered as interest but trading profit and is not exempt |
whole amount |
| Dividend income | whole amount |
| Remuneration from any office or employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of the employment. The exemption is applicable for a period of three years from 1st January following the year of commencement of the employment. |
20% of the remuneration or €8.550 (whichever is the lower) |
| Gains from disposal of securities including units in an open-ended or closed-ended collective investment scheme | whole amount |
| Remuneration from the rendering outside Cyprus of salaried services to a non-resident employer or to a permanent establishment outside Cyprus of a resident employer for a total aggregate period in the year of assessment of more than 90 days | whole amount |
| Profits from a permanent establishment maintained outside Cyprus (subject to certain conditions) | whole amount |
Deductions
The following are deducted from income:
| Interest relating to the acquisition of fixed assets used in the business | whole amount |
| Expenses for letting of buildings | 20% of the rental income |
| Interest in respect to the acquisition of a building for rental purposes | whole amount |
| Subscriptions to trade unions or The whole professional bodies amount | whole amount |
| Expenditure for the maintenance of buildings under preservation order (subject to certain conditions) (depending on the size of the building) | Up to €700, €1.100 or €1.200 per sq. m. |
| Donations to approved charitable organization (with receipts) | whole amount |
Non-deductible expenses
The following expenses are not tax deductible:
| Business entertainment expenses including hospitality expenses of any kind which are incurred for the purpose of the business . | amount in excess of 1% of the gross income or €17.086 (whichever is the lower) |
| Private motor vehicle expenses | whole amount |
| Professional tax | whole amount |
| Immovable property tax | whole amount |
| Interest payable or deemed to be payable in relation to the acquisition of a private motor vehicle, irrespective of whether it is used in the business or not, or other asset not used in the business. This restriction is lifted after 7 years from the date of purchase of the relevant asset | whole amount |
| Contributions to the Social Cohesion Fund | whole amount |
Capital Allowances
Capital allowances available for companies [See section under Companies] are also available to individuals who prepare accounts.
Losses
Carry forward of losses
Losses are carried forward indefinitely. Losses for the years 1997 onwards, which have not been offset against profits arising up to the year 2002, will be carried forward to 2003 and subsequent years without time restriction.
Where a person, including a partnership, converts his business into a limited liability company, any unrelieved losses can be transferred to the new company.
Loss of a permanent establishment outside the Republic
Losses arising from a permanent establishment maintained outside Cyprus can be offset against profits from any other sources in the same year.
However, when a profit arises from such a permanent establishment, an amount equal to the losses that have been utilized in the past against profits taxable in Cyprus, will be included in the taxable income.
Personal allowances
The following are deductible from income:
| Social insurance contributions, contributions to approved provident and pension funds, the General Health Plan, contributions to medical or other approved funds as well as insurance premiums in respect of the life of the claimant. | The whole amount up to 1/6 of the taxable income before this allowance. |
- The annual life insurance premium is restricted to 7% of the insured amount
- Life insurance policies, in respect to the life of the claimant’s spouse, which were in existence up to the 31 December 2002 and for which the claimant was receiving a tax allowance, will continue to be deductible by the claimant
- In the event of cancellation of a life insurance contract within 6 years from the date it was entered into, part of the life insurance premiums already given as an allowance will be taxable as follows:
- Cancellation within 3 years 30%
- Cancellation between 4 to 6 years 20%
Tax credit for foreign tax paid
Any tax suffered abroad on income subject to income tax will be credited against any income tax payable on such income irrespective of the existence of a double tax treaty.
Period of Assessment
The normal period of assessment in Cyprus is 1 January to 31 December. In special cases the Commissioner may permit a Substitute Accounting Period (SAP), applications should be made in writing.
