20% tax exemption for newly residents

Background

Article 8(21) of the Income Tax Legislation provides that the lower of €8.550 and 20% of the remuneration from any employment exercised in Cyprus by an individual who was resident outside Cyprus the tax year before the year of commencement of employment in Cyprus is exempt from income tax. The exemption can be claimed for a maximum period of five years, from 1 January following the year of commencing employment, up to the tax year 2020.

What’s new

On 15 December 2020, an amending law was published in the Gazette extending the application of this provision. The exemption shall continue to apply for a five year period and is available to qualifying individuals commencing employment between 2012 and 2025. Therefore, a person whose employment in Cyprus commenced up to the year 2025, has the right to claim the relevant tax exemption for a period of five (5) years (i.e. up to the year 2030 inclusive).

For example, an individual relocated to Cyprus during March 2018 and commenced employment during the same month. Under the old rules, the individual could have claimed the above exemption for the tax years 2019 and 2020 (being the last year of the application of this provision). Under the new rules, this individual can continue to apply the benefits of this provision for another three years (5 in total) for the tax years 2021,2022, and 2023.

How can we help?

We are at your disposal to discuss the application of the above provision to your personal circumstances so as to mitigate your tax liability.

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