Tax for Individuals

The taxes of individuals depend on their residential status in the country.

A Cyprus tax resident is an individual who resides in the Republic of Cyprus for more than 183 days in an assessment year; tax resident individuals are taxed based on their income worldwide. The non-tax residents are only taxed based on the income they earn in Cyprus.

 

Income Tax Rates:

Taxable Income (€)	Tax Rate %	Accumulated Tax €
0 – 19,500	NIL	NIL
19,501 – 28,000	20	1,700
28,001 – 36,300	25	3,775
36,301 – 60,000	30	10,885
Over 60,001	35

 

Tax Exemptions

1. Interest income (passive interest income may be subject to Special Deference Contribution (SDC)) – the whole amount is exempt, however still subjected to defence contribution of 30% if the individual is domiciled and a tax resident of Cyprus. Defence contribution is mostly deductible at source; the Banks of Cyprus subtract these contributions prior to their affect on the bank account.
2. Dividend Income (falls under the SDC section) – the whole amount is exempt, however subjected to defence contribution of 17% if the individual is domiciled and a tax resident of Cyprus. If an individual qualifies as a non-domicile, then SDC is 0%).
3. Lumpsum – collected as a bonus on retirement, death pension or a compensation received on injury or death.
4. Capital Sum – collected by an individual from insurance or an approved provident fund.
5. Money earned from selling immovable property, however such capital is subject to Capital Gains Tax.
6. Profit received from the sale of shares of securities, with an exception of shares of a company which holds immovable property in the Republic of Cyprus.
7. Reimbursement received from salaried services performed outside Cyprus for a period of over 90 days within a tax year to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer.
8. A tax exemption for the first employment in Cyprus for individuals who were not tax residents prior to the first employment:

– Profits recovered from foreign permanent establishment (under certain condition)

– 20% of the salary from any employment practiced in Republic of Cyprus, whereas for individuals who were not tax residents prior to the first employment the maximum of €8.550. For the employments started prior to the year 2012, the 20% deduction in tax applies for three years, starting from the year after the year of employment. For individuals who started their employment in 2012 and the years after, the tax exemption applies for five years from the year after the year the employment commenced. Exemption of 20% applies and valid until the year 2020.

– For Non-resident individuals of Cyprus, prior to the employment, 50% of the wage from any employment practiced in the Republic, given that the annual wage exceeds €100.000. If the employment started prior to 2012, the exception would apply for five years from the employment year. From 2012 and onwards, the exemption would apply for ten years from the year of employment (entitled up to the year 2020).

 

Tax deductions

The following are the deductions made from income:

1. Medical and pension fund, GHS (National Health System) contributions, social insurance, and life insurance premiums. The deductible amount limits to 1/6 of taxable revenue.
2. Donations to professional bodies or to trade unions: the whole amount can be deductible.
3. Any donations to approved charity establishments, receipts are required: the whole amount can be deductible.
4. The expenses arising from the maintenance fees of listed buildings, which have either a “preservations order” or a certificate issued by the Minister of Interior, stating that the expenses incurred are relevant to preservation and restoration work of the building. The deductible amount is dependant on the size of the building and can be €1200 / €1.100 / €700 per square meter.
5. From 01^st of January 2017, direct or indirect annual investment into approved innovate small and medium sized businesses (up to 50% of taxable income, with maximum €150,000).
6. Loss of current year and previous five years for the individuals in process of preparing audited financial statement.
7. Income on rentals

Deductions which can be made on rental income:

– 20% of the gross rental income

– interest paid for the purchase of the rental income property

– 3% on the property value less than the land cost

– from 01^st of March 2019, 1.7% on gross rental income for GHS

 

 

Example: calculation tax deduction on rentals

• Apartment is purchased for €200.000, the VAT for the purchase is €38.000.
• The apartment is then rented for €900 per month.
• The bank loan for the purchase of apartment is €140,000, which is accompanied by €3,000 interest on the loan.
• The cost of land is estimated to be 20% on the purchase price.

Based on the above-mentioned information the tax deduction calculations are:

Defence tax:

Loan 3% of the gross rental income less 25%

€900*12=€10,800

€10,800 – (€10,800*25%) = €8,100

€8,100*3% = €243 defence tax to be paid

 

GHS tax:

€900*10=€10,800

€,10800*1.70%=€183.60 GHS tax to be paid

(For the year 2019, the calculation is done for 10 months, this is limited to €180.000 total incomes of the taxpayer)

 

Income tax:

Gross Rental Income €900*12		€10,800
Less deductions
20% of Gross Rental Income	€2,160
3% Capital Allowance 230.000-(230.000*20%) =184.000*3%	€5,520
Interest paid on loan	€3,000
	_________	€10,680
		____________
Taxable Profit		€120

 

N.B. The taxable revenue is affected by individual tax rates. If the individual in the above-mentioned example has no other income in Cyprus, the tax to be paid is zero. The only tax to be paid is the defence tax, only if the individual is a Tax Residence of Cyprus and not a non-domiciled taxpayer.