On 26th July 2022, an amendment to the Cyprus Income Tax Law L.118(I)/2002 was published in the Official Gazette of the Republic of Cyprus. The amended legislation can be accessed here in CYLAW in Greek in section 8. However, we have tried to offer a simplified summary of what the new amendments entail.
Existing Tax Exemptions
The existing tax incentives provided under section 8(21) and 8(23) of the Cyprus Income Tax Law, L.118(I)/2002 apply to employment which commenced up to the publication of the present amendment, in other words 26th July 2022. These include:
- The tax exemption of 20% for any person employed in Cyprus who was previously not resident in the Republic up to a value of €8,550 for a period of 5 years, or
- A tax exemption of 50% for persons employed in Cyprus who was previously not resident in the Republic receiving an annual salary of at least EUR 100,000 for a period of 10 years, subject to conditions.
Newly introduced Tax Exemptions
The newly introduced tax exemptions provided under section 8(21A) and 8(23A) of the Cyprus Income Tax Law, L.118(I)/2002 introduce the definition of first employment, namely such incentives apply to persons who are employed in Cyprus for the first time noting that:
- A person is considered to have first employment when he/she works on a salaried basis for an employer that is a resident or a non-resident of the Republic of Cyprus.
- This definition does not take into account occasional full or part-time employment that does not exceed 120 days overall in a tax year.
The new provisions similarly to the existing incentives provide the following:
- The tax exemption of 20% for any person employed for the first time in Cyprus after 26th July 2022 who was previously not resident in the Republic and for a period of 3 consecutive years prior to commencing employment in Cyprus was employed by a non-resident employer and was residing outside Cyprus up to a value of €8,550 for a period of 7 years, or
- A tax exemption of 50% for any person employed for the first time in Cyprus as of 1st January 2022 who was previously not resident in the Republic for a period of at least 10 consecutive years and receiving an annual salary of at least EUR 55,000 for a period of 17 years, subject to conditions.
It should be noted that the new provisions apply subject to the following:
- That only one of the above may be claimed at any time (from both existing and new incentives).
- The 50% tax exemption may be applied also by persons whose first employment in Cyprus commenced between the years 2016 and 2021 with remuneration that exceeded €55,000 annually, or with remuneration that did not exceed €55,000 annually and until 26th January 2023, the remuneration exceeds €55,000 annually.