Tax year: 1 January till 31 December (calendar year)
Cyprus tax residents are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. Non-tax residents are only taxed on their income accrued or derived from sources in Cyprus. Certain types of income are subject to SCD
(See article on the taxation of investment income https://shiakas.com/taxation-of-cyprus-investment-income/)
Individuals are tax resident in Cyprus if they spend in Cyprus more than 183 days in any one year. With effect as from 1 January 2017 the “60 day rule” in addition to the “183 day rule” for tax resident individuals of Cyprus was voted on 14/07/2017.
The “60-day rule” applies to individuals who in the relevant tax year
reside in Cyprus for one or more periods which add up to at least 60 days and
do not reside in any other State for a period exceeding 183 days in aggregate and
are not tax resident of another state and
have other defined Cyprus ties eg the individual must carry out any business in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax
year, provided that such is not terminated before the end of the tax year and
the individual must maintain in the tax year a permanent residential property in Cyprus which is either owned or rented by the individual
Individuals in Cyprus are liable for SCD, if considered "domiciled" in Cyprus. Individuals are domiciled in Cyprus if they have a domicile of origin in Cyprus based on the provisions of the Wills and Succession Law (ie domicile of the father at the time of birth) except in specified cases. Individuals who are resident in Cyprus for at least 17 out of 20 years before the relevant tax year will be deemed to be domiciled in Cyprus (irrespective of domicile of origin and in accordance with the provisions of the Income Tax Law).
Taxable income
Individual income tax is imposed on income from an office or employment, business profits, rental income, overseas and cost of living allowances, bonuses (annual, performance, profit share, etc.), relocation allowances, payments in kind (such as free accommodation or meals, language lessons provided for a spouse, personal company car, and children’s education), stock options and home leave or holidays paid by your employer. Not all your income is taxable, however, as certain exemptions apply.
A resident individual is required to pay general healthcare system (GHS) contributions on various types of income (capped at €180.000,00 per year) at rates of 2,65% or 4,00%.
Capital Gains
The same as in the case of corporate organizations.
Deductions and allowances
Payments to social insurance fund, provident fund, medical fund, National health system fund, pension fund contributions and life insurance premiums, donations to approved charities, contributions to trade unions or professional bodies. Expenditure incurred in the production of taxable income are tax deductible provided they are supported by invoices or relevant receipts.
Compliance requirements
Status Each individual is assessed on a separate basis. Joint assessment of couples is not permitted.
Filing of tax return and payment of due amounts
The deadline for the electronic submission of the tax return is 31 July following the tax year for employees and self-employed individuals who are not required to file audited accounts, and 31 March of the second year following the tax year of assessment for a self-employed person whose return is based on audited accounts. Self-employed individuals with annual turnover of more than €70.000,00 must prepare audited accounts.
Employers are required by law to withhold tax on employment income under the pay-as-you-earn PAYE system. Self employed individuals pay tax through the provisional and self-assessment systems. Any due amounts are payable as at the due date of the tax return.
Penalties
Administrative penalties of €100 are imposed for late tax return or €200 for late submission of information as requested by the tax authorities. A penalty of 5% is imposed in case the tax liability as reported on the tax return is not paid by the statutory deadline or the date provided in the assessment as issued by the Commissioner of Income Tax. If the company fails to settle its tax obligations for the relevant tax year within two months after the payment deadline, an additional 5% penalty is imposed. Interest is charged on late payments according to the official rate of interest as set by the Minister of Finance for each year on the due amount.
Rulings
Rulings are available from the Commissioner of Income Tax on matters of interpretation of the tax law. A fee of €1.000,00 is payable but if an expedite response is required ie within 21 days, the fee is increased to €2.000,00.
For more detailed information for personal taxation you can have access to our Cyprus Tax Facts 2024 issue
https://shiakas.com/wp-content/uploads/2024/07/Cyprus-tax-information-2024.pdf (pages 03-16)
Please don’t hesitate to contact us
Maria Shiaka
Apserou Shiaka & co ltd
maria@shiakas.com
tel. 0035722424096