Financial Implications of Earning Income in Cyprus

If you are weighing the options and trying to decide if moving abroad to Cyprus to live and work, or even to retire, is the right thing for you to do you may want to have a look at the income tax rates in Cyprus and see how they might affect you. While Cyprus does have some of the lower tax rates in Northern Europe, it may be higher than what you are used to, which means that your money may not go as far, so you should see what type of effect the standard tax rates may have on your lifestyle.

Under current tax law, only people that are classified as residents of Cyprus are required to pay income tax on worldwide income. Those that are classified for tax purposes as non residents are only obligated to pay Cypriot income tax on income earned in Cyprus. For tax purposes you can be classified as a resident of Cyprus if you reside in Cyprus for more than 183 days per tax year, which runs from January 1st to December 31st. And Cyprus does have double taxation agreements in place with a number of countries so that your income is not taxed twice.

Personal income tax rates in Cyprus are as follows: for up to CYP 10,000 there is no tax assessed. For income of CYP 10,001 to 15,000 the effective tax rate is 20 percent and the cumulative tax is CYP 1,000. For income of CYP 15,001 to 20,000 the tax rate is 25 percent and the cumulative tax is CYP 2,250. For income over CYP 20,000 the tax rate is 30 percent and there is no cumulative tax. Note that foreign pensions and any property income is taxed at different rates than above.

You may also be eligible for some deductions to lower your income tax liability. For these deductions you would subtract them from your gross income, thus lowering your tax liability. You can deduct any contributions or premiums you have paid to orphans or widows' pension funds. You can deduct approved charitable donations and membership fees for professional and trade organizations. Up to 40 percent of the amount you deposited with a housing finance corporation is deductible as is up to 20 percent of any rental income. Loan interest for property purchase or improvement is deductible as is up to 3 percent of rental property depreciation. Contributions for social security, medical, provident, pension and life insurance funds are deductible. And if you have expenses related to maintaining property listed on a preservation order then those expenses are deductible. You will need to have receipts if applicable.

Other possible deductions are cash grants. Based on the number of children you have you are entitled to a child grant plus a supplementary grant that is based on the income of your family. The basic grant ranges from CYP 200 for one child up to CYP 600 for each child. The supplemental grant is based on income and can range from CYP 25 to CYP 200 per child. A higher education grant is also given for each child that is in college or university. The amount of the higher education grant is CYP 1,500 per child. And there is a blind grant. The blind grant is for people that are blind and is CYP 1,800 per year.

If you are wondering if your home country is one that has a double taxation agreement with Cyprus you can check the following list. These countries have double taxation agreements with Cyprus: Austria, Belarus, Belgium, Bulgaria, Canada, China, the Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, Poland, Romania, Russia, Slovakia, South Africa, Sweden, Syria, the United Kingdom, the United States and Yugoslavia. If your country is not listed you may still want to check with your tax authorities as an agreement may have just been put in place!