50% Expatriate Relief on Employment Income in Cyprus – new tax incentive law now published

The amending income tax law of Article 8(23A) was published on 30 June 2023 and has a retrospective effect as from 1 January 2022.

As from 1st January 2022, according to Section 8(23A) of the Cypriot Income Tax (“ILT”), 50% of the gross remuneration from first (1st) employment* exercised in Cyprus, is exempt from personal income tax.

This applies to:

  • Individuals who were not resident in the Republic for a period of at least fifteen (15) consecutive years prior the commencement of their 1st employment in the Republic; and
  • Individuals whose remuneration for their 1st employment in the Republic exceeds a gross salary of €55.000 on a yearly basis, at least during their 1st or 2nd year of commencement of employment in the Republic, and may be lowered (below €55.000) in any of the following tax years, provided that the Commissioner is satisfied that such variation in the annual remuneration from employment in the Republic does not constitute an arrangement aimed at obtaining the exemption.

The above relief will be granted for 17 years or until the repeal of the said subsection of the ITL, whichever occurs earlier, commencing from the year of the 1st employment in the Republic. The provisions of Section 8(21), 8(21A), 8(23) of the ITL are not applicable in case Section 8(23A) is applied.

The exemption can apply to each person once in their life, for those years that the provisions of article 8(23A) of the Income Tax Law apply.

For individuals who benefited the exemption of 50% prior the publication of the Income Tax (Amending) (No.8) Law of 2023 (“Law of 2023”) of the ITL, will continue to benefit this exemption provided that the conditions of section 8(23A) of ITL as initially published are met, namely before the change of the Law of 2023.

Grandfathering provisions

The 50% exemption applies also for individuals whose first employment commenced before 1st January 2022, starting from tax year 2022 and until the completion of 17 consecutive tax years or until the repeal of the said subsection of the ITL, whichever occurs first, beginning from the tax year in which the employment commenced in the Republic provided that they have continuous employment in the Republic from the year of commencement of his first employment up until the tax year 2021 and was not Cyprus tax resident for a period of at least 15 consecutive years immediately before the commencement of his employment in Cyprus and one of the following conditions are met:

  1. The individual has benefited 50% exemption under the provisions of Article 8(23) of the ITL; or
  2. The individual’s first employment in Cyprus commenced during the years 2016-2021 with remuneration exceeding the amount of €55.000 per year; or
  3. The individual’s first employment in Cyprus commenced during the years 2016 to 2021 with remuneration not exceeding the total amount of €55.000 per annum, and within 6 months from the date of publication of the Income Tax amending No.6 Law of 2022 in the Official Gazette of the Republic (26.07.2022) the said remuneration exceeds the amount of €55.000 per annum.

Individuals that do not meet the conditions to transition into the new employment exemptions but are eligible to benefit under the previous 50% exemption, could continue to benefit from the previous exemptions for any remaining period (the previous exemption was available for a total period of ten years).

Reminder: Individuals whose remuneration for their 1st employment in the Republic is less than €55.000 can still be granted a benefit: 20% on their remuneration or €8.500 (whichever is lower) will be exempted from personal income tax subject to specific conditions.

*First (1st) employment:

Commencement of first employment in the Republic: is considered when a person for the first (1st) time exercises salaried services in the Republic after a period of fifteen consecutive tax years in which he did not exercise any salaried services in the Republic, commences to exercise salaried services in the Republic, either for an employer resident in the Republic, or for an employer not resident in the Republic.

Individuals who meet the conditions for the 50% exemption based on Section 8(23A) of the ITL are still allowed to benefit from this exemption even if they change employer during the 17 years which are entitled to claim the 50% exemption.

IBCCS TAX – we are at your disposal

Please do not hesitate to contact us if you need additional information. We are here to assist you.

For further enquiries, please contact us by email on [email protected] or call our office in Cyprus on +357 222 58 777.