50% Income Tax Exemption for High-Earners in Cyprus
The Government of Cyprus approved today (Tuesday, 10th May, 2022) a law to exempt 50% of the salary and other remunerations of high-earners with an annual employment earning of at least €55,000 per annum from income tax.
The new rule applies to non-EU citizens as well as to EU citizens and citizens of Cyprus, subject to conditions explained further below.
The new rule applies for a period of 17 years from the commencement of employment in case of employees relocating to Cyprus, as well as to employees who are already working in Cyprus, provided that prior to the commencement of his or her employment in Cyprus he or she was abroad for 12 consecutive years.
The bill provides for a grace period for obtaining the benefit, which is two years for employees that relocate to Cyprus, and six months for employees already working in Cyprus.
Technically, the new bill reduces the threshold for the application of the income tax break from previously €100,000 to €55,000 per annum.
Cyprus Income Tax Exemption Example
Considering the non-taxable base income of €19,500, an employee with an annual gross income of €60,000 would normally pay €10,975,00 income tax, equaling to 18.29%
With the new income tax exemption in Cyprus, an annual gross income of €60,000 will be taxed at 9,15%, being €5.487,50.
A Whole Package of Incentives for Relocation to Cyprus
The new tax incentive is in line with the Strategy for Attracting Businesses for Activities and/or Expansion of their Activities in Cyprus, which had been approved by the Council of Ministers in October 2021, aiming to attract talent and promote headquartering in Cyprus.
After a Cabinet meeting today (10th May, 2022), the Minister of Finance, Constantinos Petrides said that employees and businesses opting to relocate to Cyprus due to the incentives will bring direct and indirect benefits to the Cypriot economy, while businesses are encouraged to relocate their administration to the Republic bringing “real infrastructure to the island.”
“Through this relocation, the tax base and consequently the tax income is broadened,” he added.
The new tax incentive provides yet another advantage for company relocations to Cyprus, along with the eased employment possibilities for non-EU employees, which has been decided at the beginning of 2022.