Cyprus employees who are considered to have tax resident status, pay tax on their global income. Employees not considered to be tax resident are only charged for specific types of income that are originating from Cyprus-based sources.
In order to have tax residency status in Cyprus, individuals must reside on the island for a period of 183 days within a given financial year (In Cyprus this is January to December).
The 60 Day Rule
In January 1st 2017, a secondary assessment for residency was introduced as the 60 day rule, and is currently in effect for those who fulfill the following criteria in any tax year later than 2017:
- The individual has not resided in any other state for a period surpassing a total of 183 days.
- The individual is not a tax resident in any other state.
- The individual has resided in Cyprus for a minimum of 60 days.
- The individual has other ties to Cyprus such as property or business.
Generally speaking, a Cyprus employee is not taxed on repayments for genuine business travel or entertainment expenses incurred. Nevertheless, refunds for travel between work and home or benefits of any other kind may be taxed.
Tax on Pensions
Pensions received from overseas have an exemption limit of EUR €3,420. Anything exceeding this amount is burdened independently at a tax rate of 5%. Alternatively, individuals can also choose to add their pensions to their Cyprus taxable income at the normal rates and groups, and in this manner enjoy a tax-free income of up to EUR €19,500. Individuals can choose which rate they wish to pay at the start of each tax year.
Tax on Rental Income
Any income arising from rental income is subject to income tax at the normal rates after a 20% deduction for capital allowances and general interest for purchasing of property.
- Rental income is likewise treated to Special Defense Contribution.
- Interest income (with the exception of ordinary trading/ business activities), qualifying titles, share distribution are not subject to pay tax.
For more information on current information for Cyprus income tax for residents, click here.
Alternatively, you can contact us to speak to local tax specialist.