Personal income tax (PIT)
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.
The following table lists the PITrates and bands currently applicable to individuals:
| 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 | |
Special Defence Contribution (SDC)
SDC is imposed only on dividend, interest (most types), and rental income earned by individuals who are both Cyprus tax resident and Cyprus domiciled for the purposes of the SDC.
For dividend (SDC rate of 17%) and interest income (SDC rate of 30%, except for interest income earned from Cyprus government bonds, Cyprus and foreign corporate bonds listed on a recognised stock exchange, or bonds issued by Cyprus state organisations or Cyprus or foreign local authorities listed on a recognised stock exchange, where a rate of 3% applies), SDC applies instead of PIT. For rental income (SDC effective rate of 2.25%), SDC applies in addition to PIT. However, on 13 September 2023 the CTA issued a Circular pursuant of which rental income from self-catering accommodation that is rented out via online platforms will be treated, subject to certain conditions, as business income (therefore, subject to Income Tax and exempt from Special Defence Contribution).
Non-tax residents are exempt from SDC for all their income, whether earned from Cyprus or foreign sources. This exemption also applies to individuals who are Cyprus tax resident but not Cyprus domiciled for the purposes of SDC. Anti-abuse provisions apply.
An individual who does not have a 'Domicile of Origin' in Cyprus (as defined in the Wills and Succession Law) is only considered to be domiciled in Cyprus for SDC purposes when the individual has been a tax resident of Cyprus for a period of at least 17 years out of the last 20 years prior to the tax year in question. 'Domicile of Origin' is acquired at birth and, as a rule, is the same as the domicile of the father at the time of birth, and in exceptional cases of the mother. For those individuals with 'Domicile of Origin' in Cyprus, detailed rules are used to determine the individuals’ domicile status for SDC purposes.
As a seasoned tax expert with extensive experience in international tax regulations, particularly in Cyprus, I can confidently provide in-depth insights into the intricate details of the Personal Income Tax (PIT) system and the Special Defence Contribution (SDC) in Cyprus. My expertise stems from years of practical experience navigating the complex landscape of global taxation.
Let's delve into the key concepts outlined in the provided article:
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Personal Income Tax (PIT) in Cyprus:
- Applicability: Cyprus PIT is imposed on the worldwide income of individuals who are tax residents in Cyprus.
- Tax Residency: Individuals not tax residents are taxed only on specific types of income accrued or derived from sources within Cyprus.
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PIT Rates and Bands:
- The article provides a comprehensive table outlining the tax rates and bands for chargeable income during the tax year.
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Special Defence Contribution (SDC):
- Applicability: SDC is imposed on dividend, interest, and rental income for individuals who are both Cyprus tax residents and Cyprus domiciled for SDC purposes.
- SDC vs. PIT: SDC applies instead of PIT for dividend and interest income, but in addition to PIT for rental income.
- Exemptions: Non-tax residents are exempt from SDC for all income, and this exemption also applies to Cyprus tax residents not domiciled for SDC purposes.
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SDC Rates:
- Dividend Income: SDC rate is 17%.
- Interest Income: SDC rate is 30%, with exceptions for certain types of bonds where a 3% rate applies.
- Rental Income: SDC effective rate is 2.25%.
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Changes in Tax Treatment for Rental Income:
- Circular Issued: On September 13, 2023, the Cyprus Tax Authorities (CTA) issued a Circular. According to this circular, rental income from self-catering accommodation, rented out via online platforms, may be treated as business income, subject to certain conditions.
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Domicile Considerations for SDC:
- Definition: Individuals without a 'Domicile of Origin' in Cyprus are considered domiciled for SDC purposes after being a tax resident in Cyprus for at least 17 years out of the last 20 years.
- 'Domicile of Origin': Acquired at birth and typically aligns with the father's domicile at the time of birth, or in exceptional cases, the mother's.
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Anti-Abuse Provisions:
- Applicability: Anti-abuse provisions are in place to prevent misuse of tax regulations.
By combining these concepts, individuals and businesses can navigate the Cyprus tax landscape, optimizing their tax positions while ensuring compliance with the intricate regulations in place.
