2023 Doing Business in Cyprus (India Edition)

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DOING BUSINESS C YPRUS 84 INDIA EDITION TAX INCENTIVES FOR EXPATRIATE EMPLOYEES TAKING UP EMPLOYMENT IN CYPRUS The individuals who were non-Cypriot tax residents prior to the commencement of their employment, but become Cypriot tax residents afterwards, are eligible for a 50% exemption from income tax if all the following conditions are met: • their remuneration from the employment exercised in Cyprus is over €55,000 per annum; and • they were not tax residents of Cyprus for 15 (or 10, subject to conditions) consecutive years prior to the commencement of their employment; and The exemption is available from 1 January 2022, it is granted from the first year of employment and it can be enjoyed for a period of 17 years. Individuals with annual remuneration below €55,000 who were non-Cypriot tax residents in the 3 years preceding their employment, are eligible for a 20% exemption from income tax (maximum exempt amount is €8,550 per year). The exemption is available from the 1 st of January following the year of commencement of the employment and can be enjoyed for a period of 7 years.
DOING BUSINESS C YPRUS 85 INDIA EDITION SUBMISSION OF TAX RETURNS The tax year is the calendar year. Tax on employment income is withheld by the employer under the PAYE system and remitted to the tax authorities. Self-employed individuals pay tax through the provisional and self-assessment systems. Tax returns must be filed electronically by 31 st of July following the tax year for employees, 30 th of September for self-employed persons who are not required to file audited/reviewed financial statements and 31 st of March of the year following the year under consideration (i.e. 15 months from the year-end) for self-employed persons whose returns are accompanied by audited/reviewed financial statements. Sole proprietors with an annual turnover of more than €70,000 are obliged to prepare financial statements that are either audited or are subject to a review by a statutory auditor (in case their net turnover does not exceed the amount of €200,000 and the total value of the assets without deducting liabilities does not exceed the amount of €500,000). VALUE ADDED TAX Imposition of Value Added Tax (VAT) is imposed on the supply of all goods and services in Cyprus, on the acquisition of goods from other Member States and on the importation of goods from third countries. The standard rate of 19% applies to the supplies of all goods and services in Cyprus which are not subject to the zero rate, the reduced rates (3%, 5% and 9%) or are not exempt. Cyprus constitutes an attractive EU VAT jurisdiction applying several options permissible by the EU Directive, among others, a flexible VAT Grouping. As long as the pre-requisite links are satisfied, and governmental revenues are not put into jeopardy, related entities can form a VAT group disregarding intra-group transactions and having a representative member submitting a single VAT return. SPECIAL CONTRIBUTION FOR DEFENCE Limassol Seafront Special contribution for defence (SDC) is imposed on the dividend, interest and rental income earned by Cypriot tax resident and domiciled individuals. Non-domiciled Cypriot tax residents are exempt from SDC.
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