Cyprus Country Guide 2022

Cyprus

Cyprus is considered to be one of the best places to relocate your existing business and employees. A member of the European Union since 2004, the island’s advantageous tax system makes it the jurisdiction of choice with regard to work-life balance.

On October 15th 2021, the Council of Ministers approved the “Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus”, introducing new tax incentives & policies for the employment of third-country nationals.

The main initiatives:

  • With effect from January 1st 2022 companies registered with the “Business Facilitation Unit” (BFU) as “Foreign Interest Companies“ are able to employ highly skilled third-country nationals through a fast-track process;
  • Employees with an annual salary of more than EUR 55,000 will be eligible for a 50% employment income deduction for tax purposes. The tax credit will apply to both new employees and those already working in international businesses;
  • The duration of tax benefits has been increased by 7 years (from 10 to 17 years);
  • Introduction of the Digital Nomad Visa – Non-EU citizens can reside in Cyprus and work remotely for a company abroad, or as a self-employed person offering remote services to clients outside Cyprus. The total Digital Nomad Scheme Visas are limited to 500 applications, increased from an initial 100  in anticipation of a high level of expected interest.

Entry Visa

Citizens of EU/EFTA Member States can enter Cyprus with an identity card or a valid passport.

Work Permit / Residence Permit

Citizens of EU and EFTA Member States are able to live and work without a residence permit (initially – see local registration – residence certificate), or work permit in Cyprus.

Local Registration

Residence Certificate

Citizens of EU and EFTA Member States are free to reside in Cyprus for a stay of up to three months. After this period they are required to register with the immigration department to obtain a Residence Certificate (yellow slip). We can assist in attending residency application meetings as/when required.

Tax and Social Security registration

The contractor/worker will have to register for income tax and social security purposes with the relevant authorities in Cyprus. We can assist the contractor/worker with all the registrations required.

Taxation

The tax year runs from January to December.

Tax Rates

The following progressive rates apply for 2022:

Taxable Income (EUR)Rate %
Up to 19,5000%
19,501-28,00020%
28,001-36,30025%
36,301-60,00030%
60,001 and over35%

Special Allowance for Expatriates

Scheme 1:

An individual whose residence was outside Cyprus before the commencement of employment and taking up employment in Cyprus for the first time will get an income deduction of 20% of employment income (with a maximum €8,550) annually for five years, commencing from the 1st of January of the next year.

Conditions:

  • 1st employment in Cyprus
  • Not a Cyprus tax resident upon the commencement of the employment.

Scheme 2:

A 50% employment income deduction applies to non-resident individuals, who take up a residence in Cyprus to work for an employer in Cyprus. The exemption applies for a period of 17 years starting from the first year of employment, provided that the annual income of the employee exceeds EUR 55,000 per annum.

Conditions:

  • 1st employment in Cyprus
  • Not a Cyprus tax resident for 3 out of 5 years preceding the year of commencement of employment;
  • Not a Cyprus tax resident in the year preceding the year of commencement of employment.

Tax Returns

Employees are required to file (electronically) an annual tax return by 31st July of the year following the tax year. We can assist with this.

Double Taxation Agreements

Cyprus has signed Double Taxation Agreements (DTAs) with numerous countries. The Double Taxation Agreement between Cyprus and the home country of the contractor serves to avoid double taxation in Cyprus and the contractor’s home country.

Social Security

Social Security is obligatory for all employed contractors working in Cyprus. The employee’s contribution is withheld from the gross salary and is deductible for tax purposes (i.e. qualifies for tax relief).

In 2022 the rates of social security contributions for employed persons are:

Type of InsuranceEmployer %Employee %
Social Insurance Fund8.3%8.3%
Redundancy Fund1.2%
Training Development Fund0.5%
Social Cohesion2.00%
Government Medical Scheme2.90%2.65%
Total %14,90%10,95%

The maximum monthly insurable earnings for the year 2022 for social security contribution is EUR 4,840. The only exception is the Social Cohesion, where the maximum monthly insurable earning of EUR 4,840 does not apply, and the calculation is made on the actual monthly income.

It is mandatory for all new and existing employed contractors working and contributing to social security in Cyprus to contribute to the Government Medical Scheme (GESI). The GESI rate of contribution for employers is 2.90% and for employees is 2.65%. To calculate the GESI contributions, the gross annual income is limited to EUR 180,000.

Pension

This is already covered through the social security contributions (8.3% for the employer and 8.3% of the employee).

Holiday Pay

21 days per calendar year is the minimum for a normal employment of 8 hours per day, 5 days per week, 52 weeks per year. For part-time employees, it is proportionated. If someone works for 4 hours per day, they are eligible for 10.5 days etc.

Public Holidays

  • 01 January (New Year’s Day)
  • 06 January (Epiphany)
  • Green Monday (not a standard date, usually during March)
  • 25 March (Independence Day)
  • 01 April (national day)
  • Good Friday (not a standard date)
  • Easter Monday (not a standard date, usually during April) 01 May (labour day)
  • Pentecost Monday (not a standard date, usually during June)
  • 15 August (Assumption Day)
  • 01 October (Independence Day)
  • 28 October (Greek national day)
  • 25 December (Christmas)
  • 26 December (boxing day)

Sickness

No sickness pay is obligated to be provided by the employer – sick pay is claimed, when applicable from the Social Security Department. However, the common practice is for the Employer to cover 3 sick days per calendar year.

Transition Compensation (Severance Pay)

Period of continuous employmentAmount of redundancy payment
Up to 4 years2 weeks wages for each continuous period of employment of 52 weeks
Above 4 and until 10 years2 ½ weeks wages for each continuous period of employment of 52 weeks
Above 10 and until 15 years3 weeks wages for each continuous
period of employment of 52 weeks
Above 15 and until 20 years3 ½ weeks wages for each continuous period of employment of 52 weeks
Above 20 and until 25 years4 weeks wages for each continuous period of employment of 52 weeks

Maternity / Paternity and Other Statutory Leave

Paternity: 14 consecutive days. The duration of paternity leave must fall within 16 weeks from the day of birth.

Maternity: 18 weeks starting between the 9th and 2nd weeks before the week of the expected birth. The common practice is to start 2 weeks before the estimated birth date.

Notice Period

Employer

Period of continuous employmentMinimum period of notice
Up to 25 weeksNo notice
From 26 to 51 weeks1 week
From 52 to 103 weeks2 weeks
From 104 to 155 weeks4 weeks
From 156 to 207 weeks5 weeks
From 208 to 259 weeks6 weeks
From 260 to 311 weeks7 weeks
From 312 and over8 weeks

Employee

Period of continuous employmentMinimum period of notice
Up to 25 weeksNo notice
From 26 to 51 weeks1 week
From 52 to 259 weeks2 weeks
From 260 and over3 weeks

How We Can Help

AFSS (PEO CY) Ltd is registered as a “Foreign Interest Company” in Cyprus, which enables us to provide the following services:

  • Provision of Employer of Record (EOR) services in Cyprus
  • Assistance in obtaining work permits/digital nomad visas (fast-track)
  • Limited Company Solution

For more information on how we can help you and your business, or to set up a meeting contact us at info@accessfinancial.com or by tel: +357 25 820 640

Disclaimer

WE HAVE PREPARED THIS AS A GUIDE ONLY; IT DOES NOT FORM PART OF AN OFFER. PLEASE REQUEST ILLUSTRATIONS BASED ON YOUR SPECIFIC CASE FROM ONE OF OUR SOLUTION MANAGERS.