What is Considered Taxable Income in Cyprus?

If you will be moving abroad to Cyprus to live and work you will want to know what part of your income, if any at all, will be considered taxable under current Cypriot tax law. You will also want to familiarize your self with what type of affect that will have on your income tax status in your home country.

In Cyprus the law states that Cypriot income tax is applicable to all of your income, including both income that is earned and unearned income. However, there are a few exemptions that may apply depending on your situation that may mean that some of your income is not taxable in Cyprus.

For tax purposes in Cyprus your gross income includes many types of income. Any income that you get from employment is obviously taxable income. Other types of taxable income include any bonuses that you may get at work, rental income, business profits, any cost of living allowances you may be receiving or relocations allowances, stock options, and holiday pay. You are also liable for income tax on other forms of payment that are considered income such as a company car, free living accommodations, free meals, language lessons and school tuition reimbursement.

If you are considered a non resident of Cyprus for income tax purposes then you are only liable for income tax on income earned in Cyprus. This includes employment or business income, rental income or pension payments from past employment in Cyprus.

If you are considered a resident of Cyprus for income tax purposes then you are assessed income tax on earned and unearned income worldwide. Remember though that Cyprus does have double taxation agreements in place with a number of other countries. If you are working for a company in Cyprus then your tax contribution will automatically be deducted from your pay. If you are self employed in Cyprus you are responsible for making advance payments against your tax bill.

There are a few instances when income is exempt from income taxes. A lump sum payment for retirement or as settlement for the death or injury of a spouse is not taxed. Dividends and profits from outside establishments are not taxed. Gains from trading in shares and stocks as well as interest income is not taxed. Profits from sales of securities are not taxed. Up to 20 percent, or a max of CYP 5,000 each year for three years, of your work income is not taxed if you were not a resident of Cyprus prior to your employment. And earnings from services given outside of Cyprus are not taxable if they were for no more than 90 days and your employer is in Cyprus.

Note that interest and dividend income is still subject to the Special Contribution for Defense tax.