New income tax exemptions for employment income were introduced on July 26th, 2022, amending Articles 8(21) and 8(23) of the ITL (Income Tax Law).
Article 8(21)
Prior to July 26th, 2022, according to Article 8(21) of the ITL, 20% of the remuneration or €8,550 (whichever is the lower) from any employment exercised in Cyprus by an individual who was resident outside Cyprus before the beginning of his/her employment in Cyprus was exempt from tax, with the exemption available provided for five years to individuals commencing employment in Cyprus between 2012 and 2025, starting from the tax year following the year of employment, and with the beginning of first employment considered as the time whereby the individual received salaried services in Cyprus for a resident or non-resident employer without taking into account occasional full or part-time employment in Cyprus for a period not exceeding a total of 120 days in a tax year.
Furthermore, individuals who still meet the conditions for this exemption before its termination date July 26th2022 will continue to benefit for the relevant five-year period.
As of July 26th, 2022, according to the new Article 8(21) of the ITL, 20% of the remuneration of employees, being a maximum exemption of €8.550 per year, whose first employment in Cyprus commenced from 26 July 2022 onwards, is exempt from income tax for a period of seven years, provided the employees, immediately before the commencement of their employment in Cyprus were not residents of Cyprus for a period of at least three consecutive tax years, and were employed outside of Cyprus by a non-resident employer, with the exemption being first granted in the tax year following the tax year of commencement of employment.
Furthermore, the law does not require the individual to become a Cyprus tax resident to benefit from the new 20% exemption or for the employer to be a Cyprus tax resident employer, and the tax exemption will not be granted if the 50% exemption is granted under Article 8(23).
Article 8(23)
Prior to July 26th, 2022, according to Article 8(23) of the ITL, 50% of the remuneration from any employment exercised in Cyprus by an individual who was resident outside Cyprus before the beginning of his/ her employment in Cyprus was exempt from tax, with the exemption applying provided that the annual income from such employment exceeded €100,000 for a period of ten years starting from the first year of employment in Cyprus, but with the 50% exemption not granted to an individual who has been a Cypriot tax resident for at least three out of the last five tax years immediately prior to the year of beginning of employment or to an individual who has been a Cypriot tax resident in the tax year immediately prior to the tax year of beginning of employment.
Furthermore, individuals who still meet the conditions for this exemption before its termination July 26th2022 will continue to benefit for the relevant 10-year period, unless the individual also qualifies for the new 50% exemption whereby in such a case, he/she will benefit for a period of 17 years.
As of January 1rst, 2022, according to the new Article 8(23) of the ITL, 50% of the remuneration of employees, whose first employment in Cyprus began from 1 January 2022 onwards, is exempt from
income tax for a period of 17 years starting from the month of employment in Cyprus, provided that their remuneration per year exceeds €55,000 and the employees were not residents of the Republic for a period of at least 10 consecutive years immediately before the beginning of their employment in Cyprus.
Individuals who have been benefitting from the 50% exemption and have an ongoing employment including during 2021, and individuals whose first employment started between 2016 and 2021 can also qualify for the new 50% exemption if their first annual remuneration exceeded € 55,000, or if their first annual remuneration did not exceed € 55,000 but has been exceeding € 55,000 within 6 months starting from July 26th, 2022.