QROPS Advice: Taxation of Expatriates Living in Cyprus

An individual is considered to be resident in Cyprus for tax purposes if they spend more than 183 days in any one tax year in Cyprus. Anyone who becomes resident in Cyprus for tax purposes is liable to taxation on their worldwide income at the rates
described above.
If an individual is considered a tax resident of Cyprus, but is earning income from salaried services rendered abroad for more than 90 days in a tax year, the part of their salary earned abroad is exempt from tax. Such salaried services must be carried out for either:
􀂃 A non-Cypriot resident employer, or
􀂃 The foreign permanent establishment of a Cypriot resident employer.
Any individual taking up employment in Cyprus for the first time is given an extra tax allowance on their income for a period of three years commencing from 1st January following the date they commence employment. This allowance is the lower of 20% of income or €8,543 annually.
Expatriates in receipt of foreign pension income may opt for the Special Rate of 5% taxation to be applied beyond the annual exemption limit of €3,417.
Cyprus has an extensive network of double taxation treaties with over 40 countries in respect of interest, dividends and royalties paid from and received in Cyprus.
All employees, whether they are Cypriot or EU nationals, are subject to the social security system in Cyprus. EU nationals taking on employment in Cyprus may, however, apply for an exemption from the Cypriot social security system if they continue to make contributions of such nature to their home country’s fund under EU regulation No. 1408/71.
Non-EU nationals employed by Cypriot companies are not subject to the social security system in Cyprus provided the employer company does not trade within Cyprus and they are not considered to have their ordinary residence in Cyprus.
Foreign employees working in Cyprus who are subject to the Cyprus Social Security system have to register with the Social Security authorities after they have obtained their Alien Registration Certificate (ARC).

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