Cyprus is one of the most relaxed and advantageous nations when it comes to taxation. Local taxes are at the lowest rates across the European Union. The pension income of foreign residents is a subject of taxation at a flat rate of 5% on all amounts that exceed €3.420. However, year after year, you can choose your taxation strategy given the tax rates and bands as from the table below.
Taxation Rates for 2017-2018
| Taxable Income in Euros | National Income Tax Rate |
| 0-19,500 | 0% |
| 19,501-28,000 | 20% |
| 28,001-36,300 | 25% |
| 36,301-60,000 | 30% |
| 60,001+ | 35% |
TAXES FOR FOREIGN RESIDENTS IN CYPRUS
Cyprus’ basic residence rule states that an individual is viewed as tax resident in case they spend over 183 days (in total) physically present in the country during a calendar year (the tax year).
The tax rule for non-residents states that other than the above rule, an individual will be considered a resident in Cyprus in case they meet all the following criteria:
– They spend over 60 days in Cyprus each tax year;
– They complete any business or are utilized in Cyprus or are an officer (executive) of a Cyprus resident organization;
– They keep up a changeless residence in Cyprus (possessed or leased).
Nonresidents and expats only have to pay taxes on:
- income from an employment opportunity in Cyprus (regardless of whether you are not a tax resident in Cyprus)
- the rental of an immovable property or asset located on the island,
- the pension from an employment opportunity in Cyprus.
THE KINDS OF INCOME TAXATIONS FOR FOREIGN RESIDENTS
A foreign resident living in Cyprus usually pays taxes on all kinds of revenues and profits that they gain while working or being employed abroad or in Cyprus. Foreign-sourced profits or employment income is not a subject of taxation if the individual has spent at least 90 days of the year away from Cyprus. This scheme is referred to as the “90-day rule”, and allows major compensations for frequent travelers.
Individuals who are non-tax residents in Cyprus have to pay taxes on all revenues or profits acquiring from an employment or working arrangement conducted in Cyprus only. The income in the expat tax preparation from employment also includes the estimated values for all extra benefits and gains.
Expats having employment from local organizations or self-employed are also required to make social insurance contributions. Usually they are made by the employer on behalf of the employees. These contributions rates are based on weekly or monthly salaries, as per the taxation rates for the various income limits.
TAX EXEMPTIONS AND DEDUCTIBLES FOR FOREIGN RESIDENTS
Income taxation does not include 50% of the remuneration earned from a work opportunity or job performed in Cyprus by a foreign resident before the start of the employment period. This exemption applies for a period of ten years, beginning from the very first year of the employment contract. It stays valid as long as the income of the individual is more than €100,000 per year. This exemption will not be applied if the individual was a Cypriot tax resident in the last taxation year, or at least three of the last five tax years before beginning his/her employment.
HOW DO FOREIGN RESIDENTS PAY THEIR TAXES?
As per rules and guidelines of the Pay As You Earn (P.A.Y.E), your employer or organization will be responsible for deducting the taxation amount and social security contributions from your yearly salary payments.
If your yearly income is more than €19 500, you will be required to pay your tax returns electronically via the TAXISnet, on the 31st of July of the next tax year.
Related: Cyprus Investment Market 2020.
