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Taxation
Personal income tax
Imposition of tax.
Individuals who are Cyprus tax residents are subject to tax on their
worldwide income, whether remitted to Cyprus or not. Those who are
non-Cyprus tax residents are only subject to tax on their Cypriot
income.
Tax Residency
A “Cyprus tax resident” is the individual who, in the year of assessment
(calendar year), stays in Cyprus on aggregate for more than 183 days.
Days in and out of Cyprus are calculated as
follows:
a) The day of departure from Cyprus is
taken as a day of residence outside Cyprus
b) The day of arrival in Cyprus is taken
as a day of residence in Cyprus
C) Arrival and departure from Cyprus in
the same day is taken as a day of residence in Cyprus
d) Departure and arrival in Cyprus in the
same day is taken as a day of residence outside Cyprus
|
Tax rates 2008 |
|
|
|
Chargeable income
€ |
|
Tax rate % |
|
From |
To |
|
| 0 |
19.500 |
- |
| 19.501 |
28.000 |
20 |
| 28.001 |
36.300 |
25 |
| 36.301 |
+ |
30 |
Exempt income 2008
|
Type of income |
Limit |
Note |
|
Profits
on disposal of securities |
100% |
2 |
|
Dividend income |
100% |
|
|
Interest income |
100% |
4 |
|
Lump sum on retirement,
commutation of pension or compensation for personal injury or as
gratuity on death |
100% |
|
|
Capital sums received in
respect of eligible life insurance policies, pension funds and
other approved funds |
100% |
|
|
Approved provident funds |
100% |
|
|
Income
from scholarship or educational endowment |
100% |
|
|
Widow’s
pensions under the Social Insurance Law or under approved
scheme. |
100% |
|
|
Remuneration from salaried services rendered outside Cyprus |
100% |
3 |
|
Income
emanating from letting of a preserved building |
100% |
|
|
Remuneration of
individuals who, prior to commencing employment in Cyprus were
not tax residents with maximum amount of €8.543 |
20% |
|
|
Deposits
made with the Housing finance corporation |
40% |
1 |
|
Notes: |
|
1. |
Provided the 40% limit
does not exceed 25% of the gross income of the depositor. This
applies only to savings schemes, which existed as at 30 April 2003,
and the right of claim the tax relief diminishes as soon it reaches
its sixth year after 30 April 2003. |
|
2. |
“Securities” means,
shares, bonds, debentures, founder’s shares and other securities of
companies or other legal persons, incorporated under a law in Cyprus
or abroad and options thereon. |
|
3. |
The employer must either
be a non-Cyprus tax resident or a Cyprus tax resident with a
permanent establishment abroad. For the exemption to apply, the
service abroad must be for a period or periods of more than 90 days
in aggregate, in any one-year of assessment. |
|
4. |
The exemption does not
apply if interest arises or is closely related to business
activities. |
|
5. |
The exemption applies
for a period of three years, commencing on 1 January following the
year of employment. |
Tax deductions 2008
|
Type of deduction |
Limit
% |
Note |
|
Annual
subscriptions to professional associations and trade union |
100 |
|
|
Life
insurance premiums |
100 |
4 & 5 |
|
Social
insurance fund contributions |
100 |
5 |
|
Donations
to approved charitable institutions |
100 |
1 |
|
Contributions
to approved provident funds, pension, medical, or other funds |
100 |
5 |
|
Interest
on capital used to acquire rented properties |
100 |
|
|
Expenses
incurred wholly and exclusively for the production of income |
100 |
2 |
|
Expenditure
incurred for the purpose of maintaining a preserved building |
100 |
3 |
|
Loss
of current and previous years |
100 |
|
|
Rental
income from buildings |
20 |
|
|
Foreign
pensions remitted to Cyprus |
5 |
6 |
|
Notes: |
|
1. |
In case of a loss, to the extent of
the donation, that loss is not carried forward. |
|
2. |
Excludes interest and running
expenses of saloon motor vehicles |
|
3. |
Depending on the covered area of the
building: |
|
Square meters |
€ per square meter |
|
1 |
- |
100 |
598,01 |
|
101 |
- |
1.000 |
512,58 |
|
1.001 |
- |
+ |
341,72 |
|
4. |
Provided that the
annual life insurance premium is restricted to 7% of the capital
sum assured on death. However, if the policy is cancelled
between years 1-3 then 30% of the premium allowed is treated as
income and between years 4-6, then only 20% is treated as income. |
|
5. |
The total deduction for these
allowances is restricted to 1/6th of an individual’s taxable
income before deducting these allowances. |
|
6. |
There is an annual exemption of €
3.417 |
TAXATION OF NON-TAX RESIDENTS
Imposition of tax
Subject to specific provisions in the relevant tax treaties between
the Republic of Cyprus and the country of residence of the persons
concerned, the resident person/entity who makes a payment to a non tax
resident, is obliged in the following cases to withhold and pay over to
the Inland Revenue Department tax as follows:
a) Entertainers and Athletes
The gross income derived by an individual from the exercise of any
profession or vocation, the remuneration of public entertainers and the
gross receipts of any theatrical or musical or other group of public
entertainers including football clubs and athletic missions will be
taxed at the rate of 10 per cent.
b) Royalties, e.t.c.
Non-resident individuals or companies who derive income from sources
within the Republic of Cyprus by way of royalties, premiums,
compensation or other similar income will be taxed at the rate of 10 per
cent.
However, such income is exempt where the beneficial owner is an
associated company of another EU member state or a permanent
establishment of such company.
c) Film rentals
Non-resident individuals or companies who derive income from sources
within the Republic of Cyprus by way of royalties, premiums,
compensation or other similar income will be taxed at the rate of 10 per
cent.
However, such income is exempt where the beneficial owner is an
associated company of another EU member state or a permanent
establishment of such company.
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