Cyprus has introduced new 50% and 20% tax exemption incentives for non-resident individuals that become employees in Cyprus. The incentives were introduced through the Income Tax (Amendment) (No. 6) Act of 2022, which was published in the Official Gazette on 26 July 2022. The new incentives, summarized as follows, replace prior similar incentives with generally more favorable terms and conditions.

20% Tax Exemption

The 20% tax exemption incentive provides that 20% of an individual's remuneration from their first employment in Cyprus or EUR 8,550, whichever is lower, is exempted from tax for up to seven years. The exemption is subject to the condition that, during three immediately preceding years, the individual was employed outside Cyprus by an employer that is not a resident of Cyprus. Further, the employment must begin after 26 July 2022 up to 2027.

The prior 20% tax exemption incentive was provided for up to five years for a qualifying individual. Individuals that previously met the conditions for the incentive may continue to benefit up to the five-year period.

50% Tax Exemption

The 50% tax exemption incentive provides that 50% of an individual's remuneration from their first employment in Cyprus is exempted from tax for up to 17 years. The exemption is granted for any year in which the remuneration from employment in Cyprus exceeds EUR 55,000, regardless of whether in any tax year the remuneration falls below EUR 55,000. However, the annual remuneration must exceed EUR 55,000 in the first or second year of employment, and the Commissioner must be satisfied that any fluctuation in the annual remuneration from employment in Cyprus is not an arrangement intended to grant the exemption. The exemption is subject to the condition that the individual has not been a resident of Cyprus for a period of at least 10 years immediately preceding the start of employment in Cyprus. Further, the employment must begin on or after 1 January 2022.

The prior 50% tax exemption incentive was provided for up to 10 years for a qualifying individual. Conditions included that annual remuneration exceeded at least EUR 100,000 and the individual was not a resident of Cyprus in at least three of the five years immediately preceding the start of employment in Cyprus.

Individuals that began employment prior to 1 January 2022 may enjoy the revised exemption incentive from 1 January 2022 and until the completion of a period of 17 consecutive tax years from the year in which the individual's employment in Cyprus began, including those that enjoyed the prior version of the incentive. This is subject to the condition that the individual was not a resident of Cyprus for a period of at least 10 years immediately preceding the start of employment in Cyprus and:

• the individual benefited from the prior version of the 50% exemption and has had continuous employment in Cyprus from the year of commencement of their employment until 2021; or
• the individual's first employment in Cyprus began between the years 2016 and 2021, with remuneration exceeding EUR 55,000 per year; or
• the individual's first employment in Cyprus began between the years 2016 and 2021, with remuneration that did not exceed EUR 55,000 per year but within a period of six months from the date of publication of the Income Tax (Amendment) (No. 6) Act of 2022 (26 July 2022), the remuneration exceeds EUR 55,000 per year.

Lastly, it is explicitly provided that an individual may only be granted the exemption incentive once in their lifetime for the years the incentive applies (up to 17 years).