A bill was submitted to the Cyprus Parliament amending the law on income tax, in order to expand the framework for attracting workers from abroad to Cyprus, in order to maintain its attractiveness.

Under the bill, workers from abroad will be exempt from 20% of income tax until 2025.

If an employer-employee relationship exists, there are two key forms of expatriate relief that can be used as a deduction for income tax purposes.

20% Relief

Under the current framework, a 20% deduction from income tax is granted from employment exercised in the Republic by a person who was a resident outside of the Republic before the start of employment. The 20% deduction does not commence immediately but from the 1st of January following the year employment has commenced.

The 20% deduction has a ceiling, being a maximum deduction of Euro 8.550 per annum (the lower of 20% or Euro 8.550 applies). Qualifying persons may apply for the relief up until 2025.

50% Relief

Remuneration of individuals who, before commencing employment in Cyprus, were not Cyprus tax residents and they were not Cyprus tax residents for any three out of the last five tax years and their income for employment is more than €100.000 per annum, are entitled to a deduction of 50% from income tax. Unlike the 20% deduction this is granted immediately and there is no restriction to the amount of deduction granted.

Such a deduction will be granted for 10 years, so long as the annual gross employment income exceeds Euro 100.000.

It is important to note that if the annual gross employment income drops below Euro 100.000, the 50% deduction will not apply. In such cases, however, the 20% deduction may apply.

The above deductions are granted on ‘gross emoluments’ which includes, but is not limited to, the following:

• annual gross salary as a result of the individual’s employment in Cyprus;
• bonuses;
• benefits in kind or any other type of income directly related to employment in Cyprus.

Along with its relatively low personal income tax rates, the above are one of the number of advantages Cyprus offers to expatriates who take up employment in Cyprus.

How can AGP help you with respect to tax optimisation and planning?

Our firm is proud to engage highly-qualified professionals in order to provide our clients with the best tax and corporate advice with respect to your business. Our tax lawyers, tax advisers and accountants are always willing to assist you with the following issues:

• Which taxes and duties are applicable to your business entity and what the tax rates are;
• How to reduce your overall tax burden;
• How to fully comply with the tax legislation of Cyprus;
• How to prepare and submit the tax returns;
• How to enjoy all the benefits of the Cypriot taxation system;
• Which latest changes to the Cypriot tax legislation were implemented and how to apply them etc.

Should you have any questions please contact us.