Cyprus Brain Gain Initiative
The new 25% income tax exemption under Article 8(21B), introduced by Law 17(I)/2026 as part of the “Minds in Cyprus” initiative. Retroactive from 1 January 2025.
Key Parameters at a Glance
- Exemption rate: 25% of employment income or business profits
- Annual cap: €25,000 per tax year (whichever is lower)
- Duration: Year of commencement + 6 following years (7 years total)
- Effective date: Retroactive from 1 January 2025
- Eligibility window: Employment or business activity commencing between 1 January 2025 and 31 December 2030
- Applies to: Employees and self-employed individuals
- Lifetime limit: Once per lifetime (άπαξ εφ’ όρου ζωής)
- Legislative basis: Article 8(21B), Income Tax Law (Law 118(I)/2002, as amended by Law 17(I)/2026)
Section 1 – Overview
On 6 March 2026, the Income Tax (Amendment) Law 17(I)/2026 was published in the Official Gazette of the Republic of Cyprus (No. 5076), introducing a new Article 8(21B) into the Income Tax Law (Law 118(I)/2002). This provision forms part of the government’s “Minds in Cyprus – The Brain Gain Initiative” and establishes a 25% income tax exemption, capped at €25,000 per year, for qualifying individuals who relocate to Cyprus for employment or business activity.
The measure applies retroactively from 1 January 2025 (Section 5 of the amending law) and is available for employment or business activity commencing up to and including the year 2030. It represents a significant enhancement over the previous Article 8(21A) regime and is designed to attract returning Cypriot professionals and internationally mobile talent.
Section 2 – Eligibility Conditions
To qualify for the 25% exemption under Article 8(21B), an individual must satisfy all of the following conditions (as set out in the first proviso of the article):
| Condition | Requirement |
|---|---|
| (i) Cyprus Tax Residency | The individual must be a Cyprus tax resident. An exception is allowed for the year in which the individual begins employment or business activity in Cyprus — in that year, the individual need not be a CY tax resident. |
| (ii) Commencement Window | Employment or business activity in Cyprus must have commenced from 1 January 2025 up to and including the year 2030. |
| (iii) Income Threshold | During the first twelve months, the individual must have earned employment income or business profits exceeding €30,000. This threshold must continue to be exceeded in each subsequent tax year for the exemption to remain available. |
| (iv) 7-Year Absence | The individual must not have been a Cyprus tax resident during the seven consecutive tax years immediately preceding the year in which employment or business activity commenced. |
| (v) Prior Cyprus Connection | The individual must have been a Cyprus tax resident in at least one tax year prior to the 7-year absence period. This targets returning Cypriots or individuals with an established prior connection to Cyprus. |
| (vi) Prior Foreign Employment | The individual must satisfy at least one track — see below. |
Condition (vi) — Dual-Track Foreign Employment Requirement
Track (aa) — With university degree: Holds a recognised university degree (as recognised by KY.S.A.T.S. as to equivalence) and was employed full-time outside Cyprus by a non-Cyprus resident employer for a total period of at least 36 months within the 84 months preceding the month of commencement of employment or business activity in Cyprus.
Track (bb) — Without university degree: Was employed full-time outside Cyprus by a non-Cyprus resident employer for a continuous period of 84 months preceding the month of commencement of employment or business activity in Cyprus.
Section 3 – How the Exemption Works
The exemption is calculated as 25% of the individual’s gross annual employment income or business profits in Cyprus, subject to the €25,000 annual cap (whichever is lower). The exempt amount is deducted from taxable income before applying personal income tax rates.
The exemption applies for the year in which the individual commences employment or business activity, plus the immediately following six tax years (seven years total), provided the €30,000 income threshold is exceeded in each year. The exemption is granted once per lifetime per individual.
Mutual Exclusivity — Only One Exemption Applies
Where the Article 8(21B) exemption is granted, the Article 8(21A) exemption is not available (further proviso (ii)). The law also amends the third proviso of Article 8(23A) to add 8(21B) to the list of exemptions that cannot be combined with the 50% exemption. An individual may benefit from only one of these exemptions.
Illustrative Examples
The following examples use the 2026 personal income tax bands (as amended by the December 2025 tax reform, effective 1 January 2026). For the 2025 retroactive year, the pre-reform bands would apply and the savings would differ slightly.
Example 1: Annual income of €100,000
| Item | Amount |
|---|---|
| Gross annual income | €100,000 |
| 25% exemption (capped at €25,000) | (€25,000) |
| Taxable income | €75,000 |
| PIT without exemption | €23,300 |
| PIT with exemption | €14,550 |
| Annual tax saving | €8,750 |
| Total saving over 7 years | €61,250 |
Calculation Breakdown
PIT at €100,000: €0–€22,000 at 0% = €0 | €22,001–€32,000 at 20% = €2,000 | €32,001–€42,000 at 25% = €2,500 | €42,001–€72,000 at 30% = €9,000 | €72,001–€100,000 at 35% = €9,800 | Total = €23,300
PIT at €75,000: €0–€22,000 at 0% = €0 | €22,001–€32,000 at 20% = €2,000 | €32,001–€42,000 at 25% = €2,500 | €42,001–€72,000 at 30% = €9,000 | €72,001–€75,000 at 35% = €1,050 | Total = €14,550
Example 2: Annual income of €60,000
| Item | Amount |
|---|---|
| Gross annual income | €60,000 |
| 25% exemption (25% × €60,000 = €15,000, below cap) | (€15,000) |
| Taxable income | €45,000 |
| PIT without exemption | €9,900 |
| PIT with exemption | €5,400 |
| Annual tax saving | €4,500 |
| Total saving over 7 years | €31,500 |
Note
The above examples are illustrative only, based on gross income before any deductions (social insurance contributions, GeSY, pension fund contributions, etc.) and do not account for the new family/household deductions introduced under the 2026 tax reform. Actual tax savings depend on the individual’s total chargeable income. These examples do not constitute tax advice.
Section 4 – Key Practical Points
| Point | Detail |
|---|---|
| Exemption starts from year one | Unlike the previous Article 8(21A) regime, the exemption under 8(21B) begins in the year employment commences, not the year after. |
| Once per lifetime | The law explicitly provides that the exemption is granted to each individual once in their lifetime (“άπαξ εφ’ όρου ζωής”) for the years in which the provisions of this article apply (further proviso (iii)). |
| Self-employed covered | The new exemption explicitly covers self-employed persons and business profits, broadening the scope beyond employees. This is a notable change from the previous regime. |
| Ongoing €30,000 threshold | The further proviso (i) makes clear that the exemption applies for each subsequent year only where income exceeds €30,000. If income falls below this level in any given year, the exemption would not apply for that year. |
Temporary Departures and Job Mobility
The text of Law 17(I)/2026 does not expressly address whether temporary departures from Cyprus or changes of employer during the exemption period affect eligibility. However, the official Minds in Cyprus FAQ (published by the government) states that a temporary return to one’s country of origin for one or two years does not affect eligibility, though the 7-year period continues to run and is not reset. Professional commentary also indicates that employer changes should not disqualify the individual. These points are based on official guidance and commentary rather than the text of the law itself, and individuals should monitor for any formal circulars from the Tax Department.
Consequential Amendments — Articles 20B and 20Γ
Sections 3 and 4 of the amending law update the provisos in Articles 20B(7) (Notional Interest Deduction) and 20Γ(7) (IP Box) to include references to Articles 8(21A), 8(21B), and 8(23A). This ensures the exclusion clauses in those regimes are consistent with the expanded set of employment-related exemptions.
Section 5 – Comparison — Three Exemptions Side by Side
Cyprus currently offers three personal income tax exemptions for individuals relocating to or commencing employment in Cyprus:
| Feature | Art. 8(21A) (Previous) | Art. 8(21B) (Brain Gain) | Art. 8(23A) (50% Exemption) |
|---|---|---|---|
| Exemption Rate | 20% | 25% | 50% |
| Annual Cap | €8,550 | €25,000 | No cap |
| Duration | 7 years (from year after employment) | 7 years (from year of employment) | 17 years |
| Minimum Income | None | €30,000 (each year) | €55,000 |
| Absence from CY | 3 consecutive years | 7 consecutive years | 15 consecutive years |
| Foreign Employment | 3 years by non-CY employer | 36 months (degree) or 84 months (no degree) | Not specifically required |
| Self-Employed? | No | Yes | No (employees only) |
| Prior CY Residency? | No | Yes (at least 1 year before the 7-year gap) | No |
| Lifetime Limit | Once | Once (expressly stated) | Once |
| Status | In force (expires 2027); cannot be combined with 8(21B) | In force from 6 March 2026 (retroactive to 1 Jan 2025) | In force (not affected by Law 17(I)/2026) |
Section 6 – Documentation Requirements
While the law itself does not prescribe specific documentation requirements, individuals claiming the exemption should maintain adequate supporting documentation to evidence that all eligibility conditions are met:
Recommended Documentation
- University degree certificate (where applicable), with evidence of recognition by KY.S.A.T.S.
- Payslips and employment contracts from foreign employment
- Foreign social insurance contribution records (covering at least 36 months over the 84-month period, or 84 continuous months, as applicable)
- Rental agreements or property records evidencing residence abroad during the 7-year absence
- Tax residency certificates from the relevant foreign tax authority for each of the 7 preceding years
- Evidence of prior Cyprus tax residency (at least one tax year before the 7-year absence period)
Next Steps – How We Can Help
The interaction between the three available exemptions — and the eligibility conditions for each — requires careful analysis based on each individual’s specific circumstances. Choosing the wrong exemption, or failing to maintain adequate documentation, can result in the loss of significant tax savings.
Contact Us
We advise individuals and businesses on:
- Determining eligibility under Article 8(21B), 8(21A), or 8(23A)
- Modelling which exemption delivers the best outcome based on income level and personal circumstances
- Cyprus tax residency planning and compliance
- Preparing and maintaining the necessary supporting documentation
- Coordinating with employers on payroll and withholding adjustments
If you are considering relocating to Cyprus, or if you have already relocated and wish to explore whether you qualify, we would be pleased to discuss your situation.
For tailored relocation, residency and personal tax planning, explore our Private Client services.
Disclaimer
This article is for general informational purposes only and does not constitute tax, legal, or professional advice. The information is based on the text of the Income Tax (Amendment) Law 17(I)/2026 as published in the Official Gazette on 6 March 2026 (No. 5076), and on publicly available guidance and commentary as of March 2026. The law and its interpretation may be subject to change, including through circulars or rulings issued by the Cyprus Tax Department. Individuals should seek professional advice tailored to their specific circumstances before making decisions based on the content of this article. Constantinos Markou & Co Ltd accepts no liability for any loss or damage arising from reliance on the information
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