Tax Relief For Expatriates In Cyprus

05 Sep Tax Relief For Expatriates In Cyprus

On 30 June 2023, an amending law with regards to Article 8(23A) of the Cyprus income tax legislation was published in the Official Gazette of the Republic of Cyprus. The amending legislation has a retrospective effect, as from 1 January 2022.

As per the amending law, various changes have been introduced with regards to the conditions for eligibility of the 50% exemption from income tax for first employment in Cyprus.

Below we provide a summary of the main amendments voted:

a) The non-tax residency requirement of the individual has been extended from 10 consecutive years to at least 15 consecutive years immediately before the commencement of the individual’s first employment in Cyprus.

b) The provision now applies to remuneration from employment in Cyprus, whereas before it was limited only to the remuneration from first employment in Cyprus. This amendment broadens the scope of the provision and allows individuals to qualify for the exemption even if they change employer within the period of the 17 years. Thus, the provision would also apply to any subsequent employments within the period of the 17 years.

c)The exemption applies for a period of 17 tax years or until the provisions of this Article are abolished, whichever is the earlier, starting from the tax year of commencement of the first employment of the individual in Cyprus.

d)The amending law clarifies that the “second year” referred to in the below paragraph, is the year which follows the date of the first year of employment in Cyprus:

The exemption is granted in any year in which the remuneration from employment in Cyprus exceeds €55,000, regardless of whether in any tax year the remuneration is reduced below €55,000, provided that in the first or second year of employment in Cyprus the remuneration exceeded €55,000 p.a. and the Commissioner is satisfied that the fluctuation in the annual remuneration is not an arrangement put in place with the purpose of obtaining the exemption.

e)The exemption is granted in the tax year of commencement of first employment, provided that the remuneration from employment in Cyprus during the first 12 months exceeds €55,000.

f)The provision regarding the tax year of termination, as shown below in italics, is deleted.

“The exemption is granted during the tax year of termination of employment in Cyprus or at the end of the 17 years period, provided that the remuneration from employment in Cyprus during the last 12 months of employment in Cyprus exceeds €55,000”.

g)An individual is considered to have “Commencement of first employment in Cyprus” when the individual for the first time, after the period of 15 consecutive tax years during which he/she was not performing any salaried services in Cyprus, commences the exercise of employment in Cyprus with a Cyprus or a non-Cyprus employer.

It is noted that the previous reference to occasional full or part-time employment in Cyprus, in the above paragraph, was deleted.

h)Individuals who were previously eligible for the 50% exemption of their remuneration from their first employment, based on the old provisions of Article 8(23A), will continue to benefit from the exemption provided that all the conditions, as they were in effect before the date of the publication of the Amending Law of 2023, are met.