An individual is considered to be tax resident in Cyprus by spending a total (consecutive or otherwise) of 183 days or more in any one calendar year in Cyprus. Anyone earning an income in Cyprus falls into two categories:
1. Taxpayers whose income derives solely from salaries and/or pensions
Individuals earning pension income not subjected to PAYE, payments of estimated tax must be made in two equal instalments on July 31st and December 31st throughout the relevant tax year. Any balance of payable tax should be paid by July 31st of the following tax year.
Individuals in this category can do so by submitting an electronic income tax return which needs to be completed by July 31st of the following tax year. Under the pay-as-you-earn system (PAYE) income tax is automatically deducted from salaries by employers.
2. Taxpayers who earn income from leasing, dividends, trading, interest or royalties, either in addition to a salary, pension or making up their entire income:
A. Annual earnings from income below EUR €70,000.
B. Annual earnings from income exceeding EUR €70,000.
It is required to issue invoices and receipts in respect of their trading income. Payments of estimated tax must be made in two equal instalments on July 31st and December 31st during the tax year.
Individuals under category A are required to retain records and up-to-date books and preparation of accounts (without auditing). Any balance of payable tax should be paid by June 30th of the following tax year. An electronic income tax return should be submitted by September 30th of the subsequent tax year.
Individuals under category B are required to prepare audited accounts. Any balance of payable tax should be paid by August 1st of the following tax year. An electronic income tax return can also be submitted by March 31st of the subsequent following tax year.
In respect of all individuals, income tax returns are only required to be submitted if their annual gross income exceeds the tax-free band of EUR €19,050.
Foreign tax suffered on foreign sourced income subject to income tax in Cyprus is generally available as a credit against an individual’s income tax sourced from Cyprus. Such credit cannot exceed the amount of income tax imposed on that same income.
Please note that any of the above dates may be extended on a year by year basis upon the discretion of the Cyprus Tax Authority. Get in touch for more information on the payment of personal income tax or paying tax as an employer in Cyprus.