The Cyprus government has introduced an attractive tax exemption to encourage foreign employees to work in Cyprus! Here’s what you need to know:
What is the Scheme?
- Exemption: 20% or €8,550 (whichever is lower)
- Applicable To: Individuals taking up their first employment in Cyprus
- Eligibility: Employment after July 26, 2022
- Annual Salary Limit: Less than €55,000
- Maximum Duration: Up to 7 years
Legislative Background
On July 14, 2022, the House of Representatives passed amendments to the Income Tax Law (ITL) in Cyprus, including:
- Exemptions: 20% or 50% from income tax for first-time employees
- New provisions under Articles 8(21A) and 8(23A) detailing specific conditions for exemptions.
- Circular 10/2022: Clarifies these exemptions and provides practical examples.
Key Clarifications in the Circular:
- Definitions: What constitutes “First Employment” and “Remuneration.”
- Contract Requirement: No formal contract is needed.
- Probation Periods: Counted towards the 120 days threshold.
- Multiple Employments: Exemptions apply only to the first employment.
Important Note for Eligibility:
- Individuals will qualify as employed outside Cyprus if they worked for a foreign employer exclusively outside Cyprus for the 36 months leading up to their employment start date in Cyprus.
💡 Need Assistance?
This post is for informational purposes only and is not a substitute for professional advice. For further information or assistance, consult our tax experts!
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