Payroll taxes from an employer in Cyprus

Personal income taxation is governed by the Income Tax Law (The income tax law, No. 118(I) of 2002, hereinafter referred to as the Law).
According to the general scheme of taxation of income of individuals, the procedure for paying income tax depends on two main factors:
- source of income (whether income is recognized as received from sources in Cyprus or from sources outside Cyprus);
- tax status (whether an individual - the recipient of income is recognized as a tax resident of Cyprus). As a general rule, the tax status in Cyprus is determined based on the results of the calendar year.

Tax payment procedure
As a general rule, the Cypriot company employer withholds and pays tax on the income of employees.
Despite this, each employee must file a TD1 tax return no later than July 31 of the following year - if filed electronically. The tax is paid within the same period.

Tax calculation
Cyprus has a progressive income tax rate:

• 0% (income up to €19,500);
• 20% (income over €19,500 up to €28,000);
• 25% (income over €28,000 up to €36,300);
• 30% (income over €36,300 up to €60,000);
• 35% (income over €60,000).

The stated tax rates apply to the salary of both Cyprus tax residents and tax non-residents.

Employees in Cyprus must pay their own social security contributions (Social Security Contribution) at a rate of 8.3% of gross wages (gross), but from a salary of no more than €4,840 per month (€58,080 per year). Insurance premiums are payable by the end of the month following the reporting month through the online portal.
Also, employees must pay their own contributions to the General Healthcare System at a rate of 2.65% of the amount of income (gross), but from an income of no more than €180,000 per year.
The amount of mandatory contributions reduces the tax base for calculating income tax, but not more than 1/5 of the amount of taxable income.
At the beginning of each year, the employer must obtain information from employees about the applicable deductions.

Wages are not subject to Special Defense Contributions. Such contributions are subject to dividends, interest, rental income received by tax residents who have a domicile.

Income under an employment contract of a tax resident of Cyprus is taxed in the performance of labor duties both in Cyprus and outside Cyprus.
If you perform work duties from outside Cyprus, then your income will only be taxed in Cyprus if you are recognized as a tax resident in Cyprus.
There are a number of tax exemptions available:

• for an employee who works in Cyprus and who was not previously a resident of Cyprus, in the amount of 20% of income, but not more than €8,550. This exemption is valid for 5 years from the year following the year of commencement of work in Cyprus, if the employment contract was concluded before 26.07.2022 (clause 21 part 8 of the Law);
• for an employee who works in Cyprus for the first time and who has not previously been a resident of Cyprus, in the amount of 20% of income, but not more than €8,550. This exemption is valid for 7 years from the year following the year of commencement of employment in Cyprus, if the employment contract is concluded after 26.07.2022 and until 2027. This exemption is valid if the employee was not a resident during the previous 3 years and worked for a foreign organization (clause 21A part 8 of the Law);
• for an employee who works in Cyprus and who was not previously a resident of Cyprus, in the amount of 50% of income, if the annual income is not less than €100,000. This exemption is valid for 10 years from the year of commencement of work in Cyprus, if the employment contract was concluded before 01.01.2022. This exemption is valid if the employee was not a tax resident of Cyprus in the year preceding the year of commencement of work in Cyprus, or for 3 years out of 5 years preceding the year of commencement of work in Cyprus (clause 23, part 8 of the Law);
• for an employee who works in Cyprus for the first time and who has not previously been a resident of Cyprus, in the amount of 50% of income, if the annual income is not less than €55,000. This exemption is valid for 17 years from the year of commencement of work in Cyprus, if the employment contract is concluded from 01.01.2022. This exemption is valid if the employee was not a tax resident of Cyprus during the 10 years preceding the year of commencement of work in Cyprus (clause 23A, part 8 of the Law).

The current exemptions apply to persons who perform employment functions in Cyprus, regardless of whether they have acquired Cyprus tax residency status and regardless of the tax residency of the employer. The exemption in connection with work in Cyprus for the first time is applied only once, when changing employer (group of companies) the exemption is no longer applied.
If a person meets the conditions for applying multiple exemptions, then only one of them applies.

It is also possible to apply a number of deductions, including rental costs (up to 20% of the rent), personal insurance.

Income under an employment contract of a tax non-resident of Cyprus is subject to taxation when carrying out labor activities in Cyprus. For a non-Cyprus tax resident working in Cyprus, the same income tax exemptions are available as for a Cypriot resident (see above).
If you, while working for a Cypriot company, perform your work duties remotely outside of Cyprus, then your income will be taxed in Cyprus only if you are a tax resident of Cyprus at the end of the year.

Using the buttons below, you can check whether the conditions for recognizing you as a tax resident in the country where you actually work remotely are met, and whether you have an obligation to pay tax on your salary in this country. Also find out whether Cyprus has a double taxation treaty (DTT) and its conditions in relation to wages.