Understanding Tax Residency in Cyprus
For foreign nationals working in Cyprus, the extent of tax liability is primarily determined by their residency status. Cyprus applies two distinct rules to determine whether an individual is a tax resident for any given calendar year.
- The 183-day Rule: An individual is considered a tax resident if they spend more than 183 days in Cyprus during a calendar year.
- The 60-day Rule: An individual can also be considered a tax resident if they spend at least 60 days in Cyprus, provided they do not reside in any other single state for more than 183 days, are not tax residents of another state, maintain a permanent residence in Cyprus (owned or rented), and carry out business or are employed in Cyprus.
Tax residents are taxed on their worldwide income, whereas non-residents are only taxed on income derived from sources within Cyprus. For further official details on residency status, visitors may consult the Cyprus Tax Department.
Personal Income Tax Rates 2025-2026
Cyprus utilizes a progressive tax system. Income up to a specific threshold is exempt from taxation, providing a significant "tax-free" bracket for lower-income earners and those starting their careers in the country.
The current personal income tax (PIT) brackets for the 2025 and 2026 tax years are as follows:
- €0 – €19,500 ($20,475 USD, Jan 2026): 0% (Tax-free)
- €19,501 – €28,000 ($20,476 - $29,400 USD, Jan 2026): 20%
- €28,001 – €36,300 ($29,401 - $38,115 USD, Jan 2026): 25%
- €36,301 – €60,000 ($38,116 - $63,000 USD, Jan 2026): 30%
- Over €60,000 ($63,000 USD, Jan 2026): 35%
Calculations are applied only to the portion of income falling within each bracket. Deductions for social insurance, pension funds, and life insurance premiums are generally allowable, subject to a cap of one-sixth of the total taxable income.
Social Insurance and GeSY Contributions
Payroll in Cyprus includes mandatory deductions for Social Insurance and the General Healthcare System (GeSY). These are calculated as a percentage of the employee's gross monthly salary.
Social Insurance Fund
As of 2025/2026, both the employer and the employee contribute 8.8% to the Social Insurance Fund. These contributions are capped at a maximum insurable earnings limit, which is adjusted annually. For 2025/2026, the monthly cap is approximately €5,239 ($5,501 USD, Jan 2026).
General Healthcare System (GeSY)
GeSY is a universal healthcare system funded by mandatory contributions. Unlike Social Insurance, GeSY contributions are not capped by a monthly salary limit, though they are capped at an annual income of €180,000 ($189,000 USD, Jan 2026).
- Employee Contribution: 2.65%
- Employer Contribution: 2.90%
Tax Exemptions for Foreign Professionals
To attract foreign talent, Cyprus offers substantial tax incentives for individuals who were not residents of Cyprus prior to the start of their employment.
The 50% Exemption
New residents who earn an annual gross income exceeding €55,000 ($57,750 USD, Jan 2026) are entitled to a 50% tax exemption on their employment income. This incentive is available for 17 years, provided the individual was not a resident of Cyprus for a period of 15 consecutive years before the start of their employment.
The 20% Exemption
Individuals who do not qualify for the 50% exemption may be eligible for a 20% exemption (or €8,550 ($8,978 USD, Jan 2026), whichever is lower) on their employment income. This is available for a maximum period of 7 years for employment that commenced after 2022.
Filing Procedures and Deadlines
The tax year in Cyprus follows the calendar year (January 1 to December 31). Most employees who have tax deducted at the source via the PAYE (Pay As You Earn) system are only required to file a personal tax return if their gross annual income exceeds €19,500 ($20,475 USD, Jan 2026).
Tax returns must be submitted electronically through the TaxisNet portal. The standard deadline for filing the annual Personal Income Tax Return (Form TD1) is usually July 31 of the following year. Failure to submit returns or pay taxes on time may result in administrative penalties and interest charges.
Note: For expatriates with complex income streams, such as foreign rental income or dividends, it is recommended to consult the official portal of the Tax Department for specific declaration requirements.
