Summary of Cyprus Income Tax Law Amendments Effective 26 July 2022

1. Introduction of Articles 8 (21A) and 8 (23A):

– Article 8 (23A): 
     – 50% Tax Exemption for foreign individuals with annual remuneration over €55,000.
     – Applies for 17 years for first employment starting from 1 January 2022.
     – Eligible if not a Cyprus resident for at least 10 consecutive years before employment.

– Article 8 (21A): 
     – 20% Tax Exemption or €8,550 (whichever is lower) for first employment in Cyprus.
     – Applies for 7 years,
     – Available if not a Cyprus resident for at least 3 consecutive years before employment and employed outside Cyprus by a non-resident employer.

2. Eligibility for Transition:

   – Individuals previously claiming exemptions under Articles 8 (21) or 8 (23) can transition to the new 50% exemption under Article 8 (23A).
   – Applies for individuals employed in Cyprus during 2016-2021 with remuneration exceeding €55,000 or those whose remuneration exceeded €55,000 within 6 months from 26 July 2022.

Detailed Provisions:

– 50% Exemption (Article 8 (23A)):
  – Applies from 1 January 2022.
  – For individuals not Cyprus residents for 10 consecutive years before starting employment.
  – Only once per individual’s lifetime for 17 years.
  – Grandfathering allows transition from old exemptions if conditions are met.

– 20% Exemption (Article 8 (21A)):
  – Applies from 26 July 2022.
  – For individuals not Cyprus residents for 3 consecutive years before starting employment.
  – Employment outside Cyprus by a non-resident employer.
  – Can be claimed from the year following the employment year.
  – Not necessary to become a Cyprus tax resident or to have a Cyprus resident employer.

Termination of Existing Exemptions for New Employments (Post 26 July 2022):

– Old 20% Exemption:
  – 20% or €8,550 (whichever is lower) for employment in Cyprus.
  – Available for 5 years starting the year following employment commencement.
  – Applies to individuals employed between 2012 and 2025.

– Old 50% Exemption:
  – 50% for employment with remuneration exceeding €100,000.
  – Applies for 10 years from the first year of employment.
  – Conditions include not being a Cyprus resident for at least 3 out of 5 years before employment.

– Individuals qualifying for old exemptions before 26 July 2022 continue to benefit for the prescribed period.
– Transition to new exemptions under specific conditions for a longer benefit period (up to 17 years).
– Clarifications from the Commissioner of Taxation are expected regarding the new 20% exemption’s specifics.

These amendments aim to attract foreign executives by providing significant tax breaks, enhancing Cyprus’s appeal as a business and employment destination.

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