Income Tax for Individuals in Cyprus

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Our blogs are regularly updated to ensure information is current and accurate.

author's portraitAndreas Nicolaou
7/27/2024

Income tax is money that you have to pay to the government based on how much money you earn. If you are a tax resident of Cyprus, you'll pay income tax on your income from sources inside and outside Cyprus. If you're not a tax resident of Cyprus, you'll only pay income tax on certain income you earn within Cyprus.

Tax Brackets

Income tax in Cyprus is progressive, which means that the more you earn, the more tax you'll have to pay. However, different parts of your income are taxed at different rates.


FromToTax Rate
€0€19,5000%
€19,501€28,00020%
€28,001€36,30025%
€36,301€60,00030%
€60,000 +35%

Total Income

Remember, your income isn't just your salary from your job. You must include all types of income, with only certain exceptions and deductions we'll discuss below.

For example:

Let's say you have a 9-5 office job, you sell handmade candles as a side hustle, and you also have an apartment that you rent out. To calculate your total income you must add your salary + side hustle income + rental income.


Then, after making the applicable deductions and finding your total taxable income you can determine which tax bracket you fall into and how much income tax you need to pay.


However, just because you fall under a specific tax bracket does not mean that you'll pay that percentage on your entire income.

For example:

If your taxable income falls into the 20% tax bracket, you'll only pay 20% on the amount exceeding €19,500 after deducting that amount from your total taxable income.


Say your total taxable income is €23,000, you would subtract €19,500, leaving €3,500. You then pay 20% of €3,500, which is €700.


Exemptions and Deductions

Before making your calculations, you must check if any of your income falls within exempted categories or if any deductions apply. These exemptions and deductions can lower your taxable income and reduce the amount of income tax you must pay.

Exemptions

There are several types of income in Cyprus that are not counted when calculating income tax.


ExemptionsDescription
InterestAny income from interest such as money you earn from bank savings accounts, except when it's part of business operations or related to a collective investment scheme.
DividendsProfits you receive from owning shares in companies are not calculated in income tax. However, this does not mean that they are entirely tax-free. Dividends are taxed at 17% as part of the Special Defence Contribution. But this is only applicable to Cyprus domiciled individuals. If you're non-dom then you only have to pay contributions for the General Healthcare System on your dividends.
Profit from the sale of securitiesSecurities include, but are not limited to, ordinary shares, preference shares, debentures, bonds, options on qualifying securities, futures/forwards on qualifying securities, swaps on qualifying securities, depositary receipts on qualifying securities, and participations in open-end or closed-end collective investment schemes.
Pensions and Special Relief GrantsPensions received by retired individuals as well as special relief grants under law (N. 114/1988).
Foreign Exchange GainsGains from foreign exchange differences (realised and/or unrealised). However, this does NOT include gains resulting from trading in currencies or currency derivatives. Read more about it here.
Scholarships and Educational GrantsIncome from scholarships or educational grants for students.
One-Time PaymentsLump sum payments for retirement, pension conversion, death, or bodily injury compensation as well as income from life insurance schemes and other approved funds.
Non-Residents Starting EmploymentIf you're not a Cypriot resident and come to Cyprus to work you can get a 20% tax exemption for 7 years. If you're a high earner you can get a 50% exemption. If your income is over €55,000 a year, this exemption can last for up to 17 years, while if your income is over €100,000 a year then that tax exemption can last up to 10 years.

Deductions

There are also a number of deductions you can claim that can potentially put you in a lower tax bracket or simply reduce the overall amount of tax you must pay.


If you are self-employed/sole-trader then you can also deduct any expenses used entirely for generating income for your business.


You can also claim Wear and Tear allowances for your business. You can see a list of them here.


DeductionsDescription
RentsIf you own property which you rent out, you can deduct 20% of your income from rent. For example, if you earn €10,000 a year from renting out your property, you will only pay taxes on €8,000 instead of the full €10,000.
Interest from Purchasing Rental PropertyIf you take out a loan to buy a property that you plan to rent out, you can deduct the interest you pay on that loan.
Interest on Business AssetsInterest on loans for acquiring assets used in the business is also deductible.
Contributions towards Social Insurance and other fundsYou can deduct contributions you have made towards Social Insurance GHS, Life Insurance premiums, pension funds and other approved medical and provident funds. This means that you can combine all the amounts you have given throughout the year to the abovementioned funds and deduct them from your income and thereby lowering your taxable income. However, this amount cannot exceed 20% of your income. For example, say your income for the year was €50,000. €4,400 went towards social insurance, €1,325 went towards GHS and another €6,000 went towards your life insurance. Although the total amount comes to €11,725, you can only deduct €10,000 (20% of your income), making your taxable income after all the allowed deductions to €40,000.
Investment in Innovative Small and Medium EnterprisesYou can deduct up to 50% of your taxable income if you invest in an innovative small or medium-sized business with a maximum deductible amount of €150,000 per year. There is a list of criteria to be met in order to claim this tax deduction and it is available until the end of 2026.
DonationsIf you have made donations to approved charities, you may deduct those amounts from your taxable income, provided that you have receipts.
Trade UnionsYou can also deduct any amounts you have given towards trade unions or other professional associations.
Business Entertainment ExpensesBusiness entertainment expenses (including any kind of hospitality) can be deducted, but only if the total amount of these expenses is less than or equal to 1% of the business's gross revenue for the tax year, with a maximum limit of €17.086.
Research and Development ExpensesExpenses on scientific research and research and development that are recognized under international accounting standards and incurred by a business owner who owns the intangible asset resulting from such expenses are deductible.
Audio-visual industry If you're involved in making movies, TV shows, or similar audiovisual projects, you can reduce your income tax. You can lower your taxable income by up to 50%, but this reduction can't exceed 35% of the approved expenses for making the film or show.

Keep in mind that if you are a self-employed individual, there are certain expenses that you cannot deduct. You can see a list of them here.

Income Tax Calculation Example

To better understand how income tax is calculated in Cyprus, I'll lay down a practical example using the scenario of having a full-time office job, selling handmade candles as a side hustle, and earning rental income from an apartment with some made up figures.

For example:

Annual Income Components:


  • Salary as an employee: €18,000

  • Side Hustle income: €3,000

  • Rental income: €7,000


1. Salary Income:


Gross Salary: €18,000


Deductions:

  • Social Insurance Contribution: 8.8% of €18,000 = €1,584

  • GHS: 2.65% of €18,000 = €477

  • Taxable Salary Income: €18,000 - €1,584 - €477 = €15,939


2. Side Hustle Income:


If you are both an employee and self-employed at the same time you'll have to pay Social Insurance and GHS for both.

Your side-hustle will be regarded as self-employment income for the purposes of Social Insurance and GHS and as such, your contributions will be calculated based on the estimations of the state which you can find here.

However, assuming that you apply to have your contributions based on your actual earnings using form YKA 1-017, your deductions will look like this:


Gross Self-Employment Income: €3,000


Deductions:

  • Social Insurance Contribution: 16.6% of €3,000 = €498

  • GHS: 4% of €3,000 = €120

  • Taxable Self-Employment Income: €3,000 - €498 - €120 = €2,382


3. Rental Income:


As part of the applicable deductions. You can deduct 20% of your rental income as such:


Gross Rental Income: €7,000


*(Rental Income is also subject to Special Defence Contribution for Cypriot domiciled persons at a rate of 3% on 75% of the gross rental income, but this is not deductable as part of income tax calculations. Read more about it here.)


Deductions:

  • Rental Deduction: 20% of €7,000 = €1,400

  • GHS: 2.65% of 7,000 = €185.5

  • Taxable Rental Income: €7,000 - €1,400 - €185.5 = €5,414.5


4. Total taxable income = €15,939 + €2,382 + €5,414.5 = €23,735.5


The total taxable income falls under the the 20% tax bracket only, so we calculate the tax like this:


€23,735.5 - €19,500 = €4,235.5


€4,421 x 20% = €847.1


  • 0 - 19500 0% - 0

  • 19500 - 28000 20% - €847.1

  • 28000 - 36300 25% - 0

  • 36300 - 60000 30% - 0

  • 60000+ 35% - 0


Total Income Tax = €847.1


5. Final Calculation


  • Total Gross Income - €28,000
  • Total Deductions - €4,264.5
  • Total Taxable Income - €23,735.5
  • Total Income Tax = €847.1
  • *Total Special Defence Contribution - €157.5 (included to get an accurate net income)

Net Income = €23,735.5 - €847.1 - €157.5 + €1,400 (Rent Previously Deducted)= €24,130.9


You can calculate your income tax using our tax calculator.

Registration, Returns and Payment

Registration

As an individual, to submit your tax returns and pay your income tax, you have to get a Tax Identification Number. To do that:


StepsRegistration
1Register to the (Tax For All (TFA) Taxpayer Portal) on the Tax Department's website.
2Receive your TIN and User Access Codes for TaxisNet via email.
3On first login on TaxisNet, change your password and optionally your username.

Tax Returns

From 2020 and onwards, all individuals who have taxable income are generally required to submit personal income tax returns every year. This obligation applies even if, after deductions, you are not liable to pay any income taxes.


However, the Council of Ministers can issue a decree each year that exempts individuals whose gross income does not exceed €19,500 from the obligation to submit a tax return.


In the last few years, the Council has issued such decrees, exempting these individuals. Nonetheless, there is no guarantee that this exemption will be issued every year, so you should be aware of this and check annually whether you must submit tax returns.


The deadline for submitting your tax returns for 2023 has been extended to the 31st of October 2024.


Tax returns are submitted online through TaxisNet.


The deadline is the 31st of July of the following year.

For example:

Your tax returns for 2024 must be submitted by the 31st of July 2025.


Multiple Income Sources

Suppose you are both an employee and self-employed, meaning that you have income from a salary as well as regular income from a self-employed business. In that case, you must complete both an income tax return as an employee as well as an income tax return as a self-employed person.


You can find a detailed guide on how to complete your income tax return here.

Tax Payment

Once you have submitted your tax returns, you will then have to pay the applicable taxes, if any.


StepsPayment
1Tax Payments are made through the Tax Portal .
2Use your TaxisNet username and password to log in.
3The tax statement is automatically generated based on your tax returns.
4Pay the amount due.
5Payment deadline: 31st July.

You can find a detailed guide on how to pay your income tax here .

Employees - PAYE (Pay As You Earn)

Employees whose net salary is over €19,500 and are therefore subject to income tax, don't have to pay it themselves.

Instead, there is the PAYE (Pay As You Earn) system in Cyprus, where income taxes owed by employees are paid directly through their employers. At the beginning of each year, employees must complete the form T.D.59A, detailing all earnings and personal allowances, and give it to their employer.


Using the information provided in that form, the employer can calculate your tax obligation.
Each month, the employer will deduct the appropriate amount of tax from your salary and pay it to the Tax Department on your behalf. PAYE payments must be made by the end of the following month for which they are due.

For example:

Tax deducted for July 2024 must be paid by the end of August 2024.


However, this does not mean that you're not required to submit tax returns. Until the 31st of July each year, employees must file their tax returns to confirm they've paid the correct amount of income tax. If more tax is owed, they pay the difference; if they overpaid, they receive a refund.

Self-Employed Provisional Tax Payment

If you're self-employed and you have income other than salaries, dividends, pensions and interest, such as profits from your sole trader business or rental income, you are required to pay provisional tax, which involves paying your taxes in advance based on your estimated income for the year.


This is also applicable to employees who have income other than their salary from employment, such as rental income. Provisional Tax payment should be made in two equal instalments on the 31st of July and the 31st of December.

For example:

If you're a freelancer and you estimate that your net income (after deductions) for 2025 will be €23,000 then you'll have to pay €700 divided in two equal instalments on the 31st of July and the 31st of December in provisional tax.


Wrong Estimations

In case that, during the year you realise that you have either overestimated or underestimated your income for the year then you can submit a revised provisional tax calculation by the 31st December through the Tax Portal.


Underestimation

However, if your initially declared taxable income was less than 75% of your actual income for the year and you haven't submitted a revised tax calculation by December 31st, you will be liable to pay a 10% fine on the difference between the final tax due and the provisional tax paid.


For example:

If you estimated that your net income for 2024 was €23,000 but your actual income at the end of the year came up to €40,000 you'd have to pay a fine.


That's because 75% of €40,000 is €30,000, and anything below this amount would make you liable for the fine.


Difference between the final tax due and the provisional tax paid:


Final tax due:€4,885

  • Provisional tax paid: €700

  • Difference: €4,885 - €700=€4,185

10% fine on the difference:

  • 10% of €4,185 = €418.50

Since €700 was already paid as provisional tax, you would need to pay the remaining difference of €4,185 plus an additional fine of €418.50 for underestimation, totalling €4,603.50.


Overestimation

On the contrary, if you overestimated your taxable income and ended up paying more provisional tax than you owed, you can claim a refund for the excess tax paid.

High Income Self Employed Individuals

Self-employed individuals whose annual turnover exceeds €70,000 must prepare audited financial statements. Also the tax returns date of submission is the 31 March of the second year following that tax year.

For example:

The tax return for the year 2024 must be submitted by 31 March 2026. In other words, 15 months after the end of a given tax year.





Our blogs are regularly updated to ensure information is current and accurate.