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BASIC COUNTRY FACTS

Republic of Cyprus

Nicosia

  • Greek
  • Turkish

1.17 million

Euro

.cy

+357

Euro

STATUTORY LABOR REQUIREMENTS

Probation Period

  • The employment of an employee is considered temporary for an initial period of up to 6 months. 
  • The said period may be shortened or extended by the mutual agreement of the contracting parties. 
  • The extension of the probation period cannot exceed 24 months.

Annual Leave

  • The minimum holiday period is 22 days per year. 
  • An employee may take his annual leave when he chooses provided the employer gives his consent. 
  • Usually there are regulations by the employer as to how many consecutive days leave an employee may take.

Public Holidays

  • There are 15 bank holidays in Cyprus.
    1. New Year’s Day (1st January)
    2. Epiphany (6th January)
    3. Green Monday (2nd March)
    4. Greek Independence Day (25th March)
    5. National Day (1st April)
    6. Orthodox Good Friday (17th April)
    7. Orthodox Easter Monday (20th April)
    8. Labor Day (1st May)
    9. Orthodox Whit Monday (8th June)
    10. Assumption Day (15th August)
    11. Cyprus Independence Day (1st October)
    12. Ochi Day (28th October)
    13. Christmas Eve (24th December)
    14. Christmas Day (25th December)
    15. 2nd Day of Christmas (26th December)

Maternity Leave

  • An employed woman who presents a certificate from registered medical practitioner stating the expected week of her confinement is entitled to maternity leave.
  • Maternity leave is provided for 18 consecutive weeks, of which 11 weeks must compulsorily be taken during the period beginning two weeks before the expected week of confinement

Paternity Leave

  • Paternity leave is for 2 consecutive weeks within a period of 16 weeks, commencing from the week of the birth.
  • During the paternity leave, the employee receives paternity pay to the extent and under the terms and conditions provided by the social insurance law.

Sick Leave

  • Sick pay continues for 156 days and may be extended an additional 156 days if the insured is eligible for an incapacity pension. 
  • Some employers provide sick pay for the first three days, and some pay the balance of the salary that the Social Insurance Fund does not cover.
  • Sick pay paid by the employer cannot be recovered from the state.

Work Hours

  • The standard working day is 8 hours and the standard weekly working duration is 40 hours per week. 
  • However, in the civil service the weekly work duration is 38 hours.

Overtime

  • Overtime payments depend on the employment agreement and whether there are collective agreements in place. 
  • If there are collective agreements in place, then the rate stipulated in the collective agreement is paid. In the absence of any collective agreement and any express provision in the employment contract

Notice Period

  • According to the Termination of Employment Law, the statutory minimum notice period varies from one to eight weeks, according to the employee's period of continuous employment.
  • For instance, the minimum notice period for 26 to 51 weeks of employment is 1 week. 
  • The notice period for 208 to 259 weeks of employment is 6 weeks.

Severance

  • Statutory severance pay for unlawful dismissal payable by the employer depends on the period of continuous employment and is calculated in the same way as compensation for redundancy.
  • This compensation is calculated in accordance with Table 4 of the Termination of Employment Law, which provides as follows:
    • two weeks' wages for each year of service up to four years;
    • two-and-a-half weeks' wages for each year of service from five to 10 years;
    • three weeks' wages for each year of service from 11 to 15 years;
    • three-and-a-half weeks' wages for each year of service from 16 to 20 years; and
    • four weeks' wages for each year of service beyond 20 years.
  • In cases of lawful termination of employment due to redundancy, an employee is not entitled to compensation from the employer. In such case the employee is entitled to compensation from the National Redundancy Fund, to which all employers pay monthly contributions.

INCOME TAX

  • Cyprus PIT is imposed on the worldwide income of individuals who are tax residents in Cyprus. Individuals who are not tax residents of Cyprus are taxed only on certain types of income accrued or derived from sources in Cyprus.
  • Non-tax resident individuals are charged to tax and required to file a return on income accruing or arising from sources within Cyprus i.e. income from employment exercised in Cyprus, if that income exceeds the tax free threshold of EUR19,500.

Chargeable income for the tax year (EUR*)

Tax rate (%)

Accumulated tax (EUR)

From

To

0

19,500

0

0

19,501

28,000

20

1,700

28,001

36,300

25

3,775

36,301

60,000

30

10,885

60,001

And above

35

 

 

DEDUCTIBLE EXPENSES

Personal deductions

  • Charitable contributions to approved charities (with receipts) are deductible.
  • Also deductible for PIT purposes, subject to an overall maximum deduction of 1/5 of the chargeable income, are the total of life insurance premiums (the deductible annual life insurance premium is restricted to 7% of the insured amount), employee contributions to the social insurance fund, individual pension, provident fund contributions (the deductible pension/provident fund contribution is restricted to 10% of remuneration), employee medical fund contributions (the deductible medical fund contribution is restricted to 1.5% of remuneration), and employee contributions to General Health System

Investments in approved innovative enterprises

  • As of 1 January 2017, amounts invested each year (either directly or, in certain cases, indirectly) in approved innovative small/medium sized enterprises may be claimed as tax deductible for PIT purposes. 
  • The deduction is capped at 50% of the taxable income calculated prior to claiming this deduction (subject to a maximum deduction of EUR 150,000 per year). 
  • Unused deduction can be carried forward and claimed in the following five years, subject to the caps mentioned.

Business deductions

  • For PIT purposes, generally, expenditure wholly and exclusively incurred for the generation of taxable income is deductible against the individual’s income. 
  • Such expenditure should be supported by invoices and relevant receipts or other supporting documents.

Investments in audiovisual infrastructure and technological equipment

  • Natural persons investing in audiovisual infrastructure and technological equipment related to the audiovisual industry are entitled to a 20% deduction from their taxable income for the cost of such investment, subject to certain criteria and conditions.

Employee deductions

  • For PIT purposes, generally, any employment-related expense of the employee (including contributions to trade unions or other professional bodies) is deductible, unless reimbursed by the employer. 
  • Travelling expenses between home and work are not deductible.

Deductible Expenses

Personal Deductions

  • Charitable contributions to approved charities (with receipts) are deductible.
  • The following are also deductible: -
  • life insurance premiums
  • employee contributions to the social insurance fund
  • individual pension
  • provident fund contributions
  • employee medical fund contributions
  • employee contributions to General Health System

Investments in approved innovative enterprises

  • As of 1 January 2017, amounts invested each year (either directly or, in certain cases, indirectly) in approved innovative small/medium sized enterprises may be claimed as tax deductible for PIT purposes. 
  • The deduction is capped at 50% of the taxable income calculated prior to claiming this deduction (subject to a maximum deduction of EUR 150,000 per year). 

Business deductions

  • For PIT purposes, generally, expenditure wholly and exclusively incurred for the generation of taxable income is deductible against the individual’s income. 

Investments in audiovisual infrastructure and technological equipment

  • Natural persons investing in audiovisual infrastructure and technological equipment related to the audiovisual industry are entitled to a 20% deduction from their taxable income for the cost of such investment, subject to certain criteria and conditions.

Employee deductions

  • For PIT purposes, generally, any employment-related expense of the employee (including contributions to trade unions or other professional bodies) is deductible, unless reimbursed by the employer. 
  • Travelling expenses between home and work are not deductible.

IMMIGRATION 

  • Professional and clerical employees are usually not granted visas unless no qualified local (i.e. Cypriot or EU/EEA) personnel are available. A local employer must prove that it cannot find a Cypriot employee with comparable experience.
  • However, this does not apply to highly-skilled personnel, employees from international business companies, athletes and religious icon painters. The duration of the visa is 4 years and its renewable. 
  • Foreign nationals may work in Cyprus if he or she has an employment visa. Employment visas are issued to foreign nationals who are employed in Cyprus by Cypriot entities.
  • Under the EU principles of freedom of movement, EU/EEA Nationals are free to work in Cyprus without a work / residence permit. EU Nationals from member states have the right to enter Cyprus by simply showing a valid EU passport or ID card without having to register upon arrival.
  • If there is an intention to stay and take up employment, the EU/EEA national has to apply for a Registration Certificate.
  • EU Blue Card: -
    • An application for a residence and employment permit (EU Blue Card) to work in any company of foreign interests, including international companies must be submitted to the Director of the Civil Registry and Migration Department.
    • The gross annual salary resulting from the monthly or annual salary specified in the work contract or binding job offer must be equal to or higher than the relevant salary threshold defined by the Member State (at least 1.5 times the average gross annual salary in the Member State concerned).
    • For 2014, Cyprus set the minimum salary threshold at: 23 964 EUR.
    • In Cyprus, the EU Blue Card is issued for a period of one year. If the employment contract is of shorter duration, the EU Blue Card shall be issued for the duration of the contract plus three months.

 

Type of Visa

Documentation

Validity

Eligibility

Employment Visa

  • Application on forms M.58 and M.64
  • A photocopy of one’s passport
  • A clean criminal record 
  • Medical certificates
  • A Bank letter of guarantee for 200-500 Cyprus Pounds, 
  • A work contract 
  • Social Insurance 

4 years

  • Highly-skilled personnel, employees from international business companies, athletes and religious icon painters

EU Blue Card

  • Bachelor or Master’s Degree
  • Valid Passport
  • Application Form
  • Proof of Health Insurance

1 year

  • Highly-skilled personnel
  • The gross annual salary resulting from the monthly or annual salary specified in the work contract or binding job offer must be equal to or higher than the relevant salary threshold defined by the Member State 
  • For 2014, Cyprus set the minimum salary threshold at: 23 964 EUR.

VALUE ADDED TAX

  • VAT is imposed on the provision of goods and services in Cyprus as well as on the acquisition of goods from the European Union and the importation of goods into Cyprus. 
  • Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods or services that they receive (input tax).
  • The standard VAT rate in Cyprus is 19%.
  • Additionally, two reduced VAT rates, a 9% rate and a 5% rate, apply in Cyprus.
  • The reduced VAT rate of 9% applies on accommodation, restaurant and catering services, as well as on certain local passenger transport services.
  • The reduced rate of 5% applies on foodstuffs, pharmaceutical products, books and newspapers, as well as on a variety of other goods and services that are beyond the scope of this summary.
  • The 5% reduced rate also applies to renovation and repair of all used private residences that are considered as being old (i.e. a period of at least three years has elapsed from their first use), excluding the value of materials which constitute more than 50% of the value of the services.

VAT Rates

General Rate

19%

Reduced Rate

9%
5%

 

WITHHOLDING TAX

Dividends

  • Dividends paid to a nonresident company or individual are not subject to WHT. 
  • Dividends paid by a resident company to a resident company are not subject to SCD. However, SCD is imposed at a rate of 17% on dividends paid by a resident company to another resident company after 4 years from the end of the year in which the profits distributed as dividends were earned, where the ultimate shareholders are individuals who are resident and domiciled in Cyprus.
  • Dividends paid to a resident and domiciled individual are subject to SCD at 17% (applied as a WHT), unless the dividends are paid directly or indirectly from dividends on which SCD already has been paid.

Interest

  • No WHT is imposed on interest paid to a nonresident.
  • Interest paid to a resident company or individual is subject to 30% SCD, withheld at source
  • Companies are required to withhold GHS contributions on interest payments to Cyprus tax-resident individuals at the rate of 1.7% (2.65% as from 1 March 2020)

Royalties

  • Royalties paid to a nonresident company or individual for the use of rights inn Cyprus are subject to a WHT of 5% on film royalties, and 10% on all other royalties.
  • These rates may be reduced under a tax treaty, or the EU interest and royalties’ directive.
  • Royalties paid to a nonresident for the use of rights outside Cyprus are exempt from WHT. 
  • There is no WHT on the payment of royalties to resident individuals or companies.

Fees for technical services

  • Fees for technical services paid to a nonresident company or individual are subject to a 10% WHT, unless the rate is reduced under a treaty.
  • There is no WHT on the payment of fees for technical services to resident individuals or companies

WHT

Dividends

  • Dividends paid to a resident and domiciled individual are subject to SCD at 17% (applied as a WHT), unless the dividends are paid directly or indirectly from dividends on which SCD already has been paid.

Interest

  • Interest paid to a resident company or individual is subject to 30% SCD, withheld at source
  • Companies are required to withhold GHS contributions on interest payments to Cyprus tax-resident individuals at the rate of 1.7% (2.65% as from 1 March 2020)

Royalties

  • Royalties paid to a nonresident company or individual for the use of rights inn Cyprus are subject to a WHT of 5% on film royalties, and 10% on all other royalties.

Fees for technical services

  • Fees for technical services paid to a nonresident company or individual are subject to a 10% WHT, unless the rate is reduced under a treaty.

TERMINATION

Dismissals that cannot be justified under any one of the grounds below are considered unlawful per se:

    • unsatisfactory performance (excluding temporary incapacitation due to illness, injury or childbirth);
    • redundancy;
    • force majeure, act of war, civil commotion or act of God;
    • termination at the end of a fixed period;
    • conduct which renders the employee subject to summary dismissal; or
    • conduct which makes it clear that the relationship between employer and employee cannot reasonably be expected to continue, commission of a serious disciplinary or criminal offence, indecent behavior or repeated violation or ignorance of employment rules.
  • Written notice of termination must be given to the employee outlining the reasons for the dismissal and the effective date of termination.
  • Employees are generally protected from dismissal for any reason that is not a legally justified ground for dismissal. 
  • Furthermore, it is a criminal offence to dismiss a pregnant employee from the time of presentation with a doctor's certificate of pregnancy up to five months after the end of maternity leave.

STATUTORY BENEFITS

  • These refer to mandatory benefits as stipulated by law
  • Statutory benefits include probationary period, annual leave, public holidays, sick leave, maternity and paternity leave, notice period, severance pay in case of unfair dismissal, redundancy pay.
  • Statutory benefits also include social security benefits include unemployment benefits, pension, workers’ medical benefits, sickness and maternity benefits, disability pension.

Statutory Benefits

Probationary period

Annual Leave

Public Holidays

Sick Leave

Maternity

Paternity Leave

Notice Period

severance Pay

Redundancy Pay

Unemployment Benefits

Pension

Workers’ medical benefits

Sickness and maternity benefits

Disability Pension

 

PAYMENTS AND INVOICING

  • Individuals must file their income tax returns electronically via the Taxisnet system, not later than 31 July following the end of the tax year (31 December), in the instance where their gross income exceeds the tax free threshold of 19,500 Euros (EUR).
  • A claim for deductions and allowances (IR59) is prepared at the beginning of the tax year and a statement of taxable income (IR63) for the tax year must accompany the tax return when submitted.
  • A self-assessment computation should be completed on the tax return. In the instance where a tax liability arises from the self-assessment computation, the tax should be paid by 31 July following the end of the tax year (e.g. by 31 July 2019 for the 2018 tax year).

 EASE OF DOING BUSINESS

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Cyprus ranked 54th in the World in 2019 in terms of ease of doing business.

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