Expatriate tax ebook - Cyprus

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Individuals who are Cyprus tax residents are subject to tax on their worldwide income, whether remitted to Cyprus or not.

Individuals who are non-residents of Cyprus for tax purposes are subject to tax only on their Cyprus-source income.

Residence
For tax purposes a “Cyprus tax resident” means:
An individual who, in the year of assessment (calendar year), stays in the Republic of Cyprus for a period or periods exceeding in aggregate 183 days.
Days in and out of Cyprus are calculated as follows:

1. the day of departure from Cyprus is taken as a day of residence outside Cyprus
2. the day of arrival in Cyprus is taken as a day of residence in Cyprus
3. arrival in and departure from Cyprus on the same day is taken as a day of residence in Cyprus
4. departure from and arrival in Cyprus  the same day is taken as a day of residence outside Cyprus.

Income from employment
Employment income includes income arising from an office under a contract of service and the income of office holders, such as directors of companies. The income from employment is otherwise described as emoluments which includes the following:

• salary
• wages
• overtime
• bonuses
• allowances
• share of profits
• fees (such as directors fees)
• commissions

Source of employment
As mentioned above, where duties are performed in Cyprus, any remuneration received in respect of such duties is treated as Cyprus sourced income and therefore subject to Cyprus income tax regardless of the expatriate's tax residence status.

Benefits (in kind)
In general where any of the above emoluments is paid in kind (rather than cash) it is taxable under the Cyprus tax laws.

Expatriate concessions
Remuneration of individuals who, before commencing employment in Cyprus , were not Cyprus tax residents, are entitled to an exemption of 20% of their emoluments up to a maximum of €8.543 for the 3 years following their first year of employment in Cyprus.

Relief for foreign taxes
Where income has been subject to tax twice (in Cyprus and a foreign jurisdiction), relief can be granted by the Cyprus Tax Authority provided that enough documents are presented to prove payment of tax abroad.

Deductions against income
Allowable personal deductions are:

• Life insurance premiums
• Social insurance contributions
• Approved provident fund contributions
• Approved medical schemes contributions
• Subscriptions to professional bodies
• Donations to approved charities

Information about Cyprus:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities