The tax is levied and collected on the taxable income of each individual which is acquired during each fiscal year. The tax year is the year of twelve months ending December 31st of each year.
Tax residence of individuals
Under the legislation, all individuals are separated as Tax residents and Non-Tax residents. The Cyprus Tax residents are taxed according to their income from sources both within and outside the Republic. On the contrary Non-Tax residents are taxed only on income arising in the Republic. Cyprus Tax resident is a person who stays in Cyprus for one or more periods that in aggregate exceed 183 days per fiscal year.
Obligation to submit tax declaration
All persons are required to submit a Tax Return Income when the gross income exceeds the amount of untaxed income. For the year 2010 the tax-exempt income is € 19.500. Gross income is defined as income before deducting any expenses related to this income. The deadline for submitting the tax declaration for the year 2010 ends on April 30th, 2011. Failure to submit the declaration on time, has an additional charge of € 51 (€ 100 from 1 July 2011).
Tax exemptions – Deductions
The Law defines precisely the rights of exemption deducted from the earnings of taxpayers during the tax year that the payments were made.
■ Contributions to the Social Security and various pension funds, provident or medical care – means that the funds receive the approval of the Commissioner.
■ Payments to insurance companies related to life insurances with several benefits of any type of annuity providers, which have been approved by the Superintendent as a project.
■ Subscriptions to trade unions or professional associations.
■ Donations to approved charity institutions (proof required).
■ Expenses for rents receivable (discharge 20% of the rent) plus payable interest.
■ Payout of life insurance or approved provident fund or other funds.
■ Any amount received at retirement (lump sum) or as a gratuity or compensation for death
■ Profits from the sale of securities
■ Rents from listed buildings
■ Fees from providing payroll abroad for more than 90 days for an employer who is not resident in Cyprus
■ 20% of the salary or € 8.543 (whichever is smaller) from an employer in Cyprus of a person who is / was a resident abroad before the beginning of employment in Cyprus. The exemption is valid for three years, beginning on January 1st of the year following the year in which the employment began.
■ Pensions from abroad: A person who receives a pension in Cyprus from abroad is subject to special tax rates as follows:
■ Up to € 3.417: … … … … … … … ……………………………….. ….. 0%
■ More than € 3.417 :…………………………………….. ………………….. 5%
The taxpayer may choose to be taxed at normal rates for each year separately.