[Cyprus] Reason Cyprus is an ideal employment destination

Cyprus is a sunny island in the east of the Mediterranean Sea strategically linking Europe, Africa and Asia.  It has been a member of the European Union since May 1, 2004. Cyprus has a modern and quick-moving economy which is responsive to current circumstances. Its inhabitants enjoy a high quality of life and a safe environment to raise a family. As a result, the country offers an appealing combination of climate, business, culture and among its many relocation incentives.  

Having overcome the challenges of 2013, Cyprus is one of the fastest-growing economies in the Eurozone thanks to a promising economic outlook. This promise is echoed by consecutive credit rating upgrades by international rating agencies, such as Moody's. Cyprus achieved an investment grade in September 2018. 

In addition, Cyprus offers a number of investment opportunities in areas like professional services, tourism, shipping, real estate and, in more recent years, energy. The majority of the island’s Gross Domestic Product (80 per cent) comes from the provision of professional services in these areas. The technology infrastructure, the attractive tax regime and its network of tax treaties attract numerous multinational companies as well as individuals to Cyprus. 

To attract more employees and high profile personnel, Cyprus introduced a variety of personal tax allowances and some relocation benefits. Some of the most important tax-related incentives for an individual to relocate to and reside in Cyprus are the following: 

20 per cent Exemption 

20 per cent of the remuneration from any employment exercised in the Republic by an individual who was resident outside the Republic before the commencement of the employment or 8550 EUR (whichever is lower) is exempt for income tax purposes. It is important to note that, for employment commencing during or after 2012, the exemption applies for a period of 5 years starting from the tax year following the year of employment, with the last eligible tax year being 2020. 

50 per cent Exemption 

Remuneration from any employment exercised in the Republic by an individual who was resident outside the Republic before the commencement of the employment provided that the annual remuneration of the employee exceeds €100.000. The exemption applies for a 10 year period. And for employment commencing during or after 2015, the exemption does not apply if the employee was a Cyprus tax resident in the preceding tax year or for at least 3 out of the last 5 tax years immediately prior to the tax year of commencement of employment. 

90 days rule Exemption 

Remuneration received for employment exercised outside Cyprus for an employer not resident in Cyprus - or to a permanent establishment outside Cyprus of an employer resident in Cyprus - for a period exceeding 90 days in aggregate in a tax year is exempt from tax in Cyprus. 

The conditions in Cyprus are also favourable to individuals considered as Cyprus tax residents, those who spend more than 183 days in the Republic or those who meet the criteria of the 60 days rule as below: 

• Spending at least 60 days in the Republic of Cyprus 
• Maintain a permanent home in Cyprus (owned or rented) 
• Carrying on a business or being employed in Cyprus 
• Cyprus tax residents are taxed on their worldwide generated income. 

The Cyprus personal income tax rates are progressive and range from 0 per cent to 35 per cent in different scales, as demonstrated below: 

Cypriot Personal Income Tax (PIT), is levied based on the PAYE principle. An employer should register for Cypriot Income Tax purposes, withhold PIT from the employee’s salary and remit this to the tax authorities by the end of the following month. 

At the end of every year, the employer has an obligation to furnish each of its employees with a certificate of emoluments (Form T.D. 63), detailing their remuneration (including benefits in kind) for the year, Income Tax deductions, Social Insurance Contributions and other contributions. 

Social Insurance and other contributions in Cyprus 

Regarding Social Insurance contributions, it is worth noting that the Cypriot Social Insurance Scheme provides, amongst others, coverage for old-age pension, sickness, maternity, work injury and unemployment benefits. Social Insurance contributions are compulsory for every person gainfully occupied in Cyprus whether employed or self-employed. 

Both employees and employers are subject to social insurance contributions. Each employee contributes 8.3 per cent of his/her gross employment income while an employer contributes 8.3 per cent to the Social Insurance fund, 2 per cent to the Cohesion Fund, 0.5 per cent to the Industrial Training Fund and 1.20 per cent to the Redundancy Fund. 

Contributions to the Social Insurance Fund are made monthly on the gross emoluments of each employee up to a maximum amount, which changes every year. A contribution is to be paid by both the employee and the employer.  

As mentioned above, the maximum level of income on which Social Insurance contributions are paid (“the insurable earnings”) is revised every year. For 2019, the maximum amount of insurable earnings for the purpose of contributions was capped at 4554 EUR on a monthly basis (54.648 EUR on a yearly basis). If the actual earnings are higher than the maximum amount of insurable earnings, no contribution is paid on that higher amount. Contributions to the Social Cohesion Fund are not capped. 

In addition, Cyprus has entered into bilateral social insurance conventions with a number of countries. Such conventions should be carefully reviewed since a person who is employed abroad and sent by his employer to work temporarily to Cyprus may continue to be insured and his employer should continue to pay contributions to the home country as long as the temporary employment does not exceed a defined period of time. Also, as an EU member state, EU regulations are followed. 

It is important to be aware that from March 1, 2019, employees and employers are also subject to contributions to the General Health Care System at the rate of 1.7 per cent and 1.85 per cent respectively.  

Cyprus is an emerging economy in the Mediterranean, with promising projects in the pipeline, a favourable regime, both for individuals and companies, secure living environment, an agreeable climate and a strategic location. These reasons and many more make Cyprus a uniquely appealing destination either to reside or to execute employment duties!

OTHER ARTICLES THAT MAY INTEREST YOU

Glitch in GHS System Rejects Turkish Cypriots and EU Nationals

New UK-Cyprus double taxation deal sees pension winners and losers

Over 59,000 data breaches reported in Europe since GDPR

Cyprus is a sunny island in the east of the Mediterranean Sea strategically linking Europe, Africa and Asia.  It has been a member of the European Union since May 1, 2004. Cyprus has a modern and quick-moving economy which is responsive to current circumstances. Its inhabitants enjoy a high quality of life and a safe environment to raise a family. As a result, the country offers an appealing combination of climate, business, culture and among its many relocation incentives.  

Having overcome the challenges of 2013, Cyprus is one of the fastest-growing economies in the Eurozone thanks to a promising economic outlook. This promise is echoed by consecutive credit rating upgrades by international rating agencies, such as Moody's. Cyprus achieved an investment grade in September 2018. 

In addition, Cyprus offers a number of investment opportunities in areas like professional services, tourism, shipping, real estate and, in more recent years, energy. The majority of the island’s Gross Domestic Product (80 per cent) comes from the provision of professional services in these areas. The technology infrastructure, the attractive tax regime and its network of tax treaties attract numerous multinational companies as well as individuals to Cyprus. 

To attract more employees and high profile personnel, Cyprus introduced a variety of personal tax allowances and some relocation benefits. Some of the most important tax-related incentives for an individual to relocate to and reside in Cyprus are the following: 

20 per cent Exemption 

20 per cent of the remuneration from any employment exercised in the Republic by an individual who was resident outside the Republic before the commencement of the employment or 8550 EUR (whichever is lower) is exempt for income tax purposes. It is important to note that, for employment commencing during or after 2012, the exemption applies for a period of 5 years starting from the tax year following the year of employment, with the last eligible tax year being 2020. 

50 per cent Exemption 

Remuneration from any employment exercised in the Republic by an individual who was resident outside the Republic before the commencement of the employment provided that the annual remuneration of the employee exceeds €100.000. The exemption applies for a 10 year period. And for employment commencing during or after 2015, the exemption does not apply if the employee was a Cyprus tax resident in the preceding tax year or for at least 3 out of the last 5 tax years immediately prior to the tax year of commencement of employment. 

90 days rule Exemption 

Remuneration received for employment exercised outside Cyprus for an employer not resident in Cyprus - or to a permanent establishment outside Cyprus of an employer resident in Cyprus - for a period exceeding 90 days in aggregate in a tax year is exempt from tax in Cyprus. 

The conditions in Cyprus are also favourable to individuals considered as Cyprus tax residents, those who spend more than 183 days in the Republic or those who meet the criteria of the 60 days rule as below: 

• Spending at least 60 days in the Republic of Cyprus 
• Maintain a permanent home in Cyprus (owned or rented) 
• Carrying on a business or being employed in Cyprus 
• Cyprus tax residents are taxed on their worldwide generated income. 

The Cyprus personal income tax rates are progressive and range from 0 per cent to 35 per cent in different scales, as demonstrated below: 

Cypriot Personal Income Tax (PIT), is levied based on the PAYE principle. An employer should register for Cypriot Income Tax purposes, withhold PIT from the employee’s salary and remit this to the tax authorities by the end of the following month. 

At the end of every year, the employer has an obligation to furnish each of its employees with a certificate of emoluments (Form T.D. 63), detailing their remuneration (including benefits in kind) for the year, Income Tax deductions, Social Insurance Contributions and other contributions. 

Social Insurance and other contributions in Cyprus 

Regarding Social Insurance contributions, it is worth noting that the Cypriot Social Insurance Scheme provides, amongst others, coverage for old-age pension, sickness, maternity, work injury and unemployment benefits. Social Insurance contributions are compulsory for every person gainfully occupied in Cyprus whether employed or self-employed. 

Both employees and employers are subject to social insurance contributions. Each employee contributes 8.3 per cent of his/her gross employment income while an employer contributes 8.3 per cent to the Social Insurance fund, 2 per cent to the Cohesion Fund, 0.5 per cent to the Industrial Training Fund and 1.20 per cent to the Redundancy Fund. 

Contributions to the Social Insurance Fund are made monthly on the gross emoluments of each employee up to a maximum amount, which changes every year. A contribution is to be paid by both the employee and the employer.  

As mentioned above, the maximum level of income on which Social Insurance contributions are paid (“the insurable earnings”) is revised every year. For 2019, the maximum amount of insurable earnings for the purpose of contributions was capped at 4554 EUR on a monthly basis (54.648 EUR on a yearly basis). If the actual earnings are higher than the maximum amount of insurable earnings, no contribution is paid on that higher amount. Contributions to the Social Cohesion Fund are not capped. 

In addition, Cyprus has entered into bilateral social insurance conventions with a number of countries. Such conventions should be carefully reviewed since a person who is employed abroad and sent by his employer to work temporarily to Cyprus may continue to be insured and his employer should continue to pay contributions to the home country as long as the temporary employment does not exceed a defined period of time. Also, as an EU member state, EU regulations are followed. 

It is important to be aware that from March 1, 2019, employees and employers are also subject to contributions to the General Health Care System at the rate of 1.7 per cent and 1.85 per cent respectively.  

Cyprus is an emerging economy in the Mediterranean, with promising projects in the pipeline, a favourable regime, both for individuals and companies, secure living environment, an agreeable climate and a strategic location. These reasons and many more make Cyprus a uniquely appealing destination either to reside or to execute employment duties!

OTHER ARTICLES THAT MAY INTEREST YOU

Glitch in GHS System Rejects Turkish Cypriots and EU Nationals

New UK-Cyprus double taxation deal sees pension winners and losers

Over 59,000 data breaches reported in Europe since GDPR