New Tax Exemptions for Expats
Cyprus Parliament has approved a new law to encourage foreign Companies to set up base in Cyprus. This new law includes generous tax exemptions for individuals to set-up base and be employed in Cyprus.
With this new legislation which has been approved the Cyprus Government has completed the package of measures which were included in the strategic plan to attract foreign businesses in Cyprus.
The new legislation includes amongst others that the 50% of the remuneration of new employees of which the employment starts on or after 1st of January 2022 is 50% exempt for a period of 17 years provided that their salary is more than €55.000 and they were not tax residents of Cyprus for a period of 10 consecutive years before their employment in the Republic.
The parliament also passed an amendment of the tax law to allow for legal entities to also be allowed to be included in the tax incentive for ‘Investments in innovative Companies’.
With this amendment the 30% of the amount invested in innovative Companies by legal entities will be tax deductible provided that the benefit from the allowed deduction does not exceed the 50% of the total taxable income of the entity with maximum amount €150.000.
Key Take-Aways in a nutshell:
- New Employees (employed after 1.1.2022)
50% tax exemption for a period of 17 years if your annual Income from first employment in Cyprus is more than €55.000. Applicable if the individual has not been a resident of Cyprus for at least 10 years prior to the beginning of employment in the Republic of Cyprus. There is also a two years grace period to reach the threshold of €55.000.
- Existing employees (employed from 2016-2021)
Similar tax exemption is also provided to existing employees for fair treatment purposes. That is if you were employed from 2016 to 2021 you get the 50% tax exemption for a period of 17 years as well, if ofcourse your first employment in Cyprus was more than €55.000.
This is provided if you have already exceeded the €55.000 or you will exceed it within 6 months from the 14th of July (from your first employment in the Republic) and you have not been a tax resident in the Republic for a period of 12 years prior to the beginning of your employment in Cyprus.
- Extension of the existing 50% tax exemption from 10 to 17 years
If you have not been a resident of the Republic for at least 10 years prior to the beginning of your employment in the Republic of Cyprus then your period of enjoying the 50% tax benefit will be 17 years as indicated above.
If you were a resident of Cyprus within 10 years before your employment and have been already enjoying the tax benefit of 50%, you will continue to enjoy it until the end of your 10 years period.
- Existing incentive of 20%
If you already use the 20% tax exemption, you will continue to enjoy the tax benefit until the end of your 7 year period (i.e. in cases were you earn less than €55.000).
- New incentive of 20%
Anyone who earns less than €55.000 and hasn’t been a Cyprus resident for at least 3 years prior to taking up employment in the country will receive a 20% or €8,550 (lower of), for the next 7 years.
If you earn more than €55,000 but don’t meet the criteria of not been a resident of Cyprus for a period of at least 10 years prior to employment, you can receive a 20% or €8,550 (lower of), for the next 7 years.
As a conclusion, the above law is aiming at making Cyprus a destination for individuals to live and work and is in conjunction with many other benefits the island has to offer as showcased here.
For more information on Cyprus Tax Residency please click here or contact us.
*Please note that the above are indicative and do not constitute tax advise.
