Cyprus has introduced a 25% tax exemption in an effort to encourage highly skilled professionals working abroad to return to the island.
Executive Summary of the 25% Exemption
Under the new provisions, eligible individuals may claim a 25% tax exemption on remuneration from employment or profits from a business in Cyprus.
Cap: The exemption is limited to €25,000 per annum.
Effective Date: Retroactively applicable from 1 January 2025.
Threshold: Remuneration or business profits exceeding €30.000
Duration: Valid for a period of 6 years for activities commencing no later than the end of the 2030 tax year.
Key provisions
To qualify for this incentive, an individual must cumulatively satisfy the following conditions:
He/she is a tax resident in Cyprus, except for the year in which he/she begins to be employed or to carry on a business in Cyprus; and
He/she began to be employed or to carry on a business in Cyprus from 1st of January 2025 up to and including the year 2030; and
During the first twelve (12) months following the commencement of employment or business activity in Cyprus, he/she had employment income or business profits exceeding €30.000; and
He/she was not a tax resident in Cyprus during the seven tax years immediately preceding the year in which employment or business activity commenced in Cyprus; and
He/she has been tax residents in Cyprus in at least one tax year prior to the 7 year period.
He/she meets at least one of the following conditions:
- Holds a recognised university degree and was employed on a full-time basis outside Cyprus by a non-Cypriot tax resident employer for at least 36 months within the 84 months preceding the month of commencement of employment of business activity in Cyprus; or
- Was employed on a full-time basis abroad by a non-Cyprus employer for a continuous period of 84 months preceding the month of commencement of employment of business activity in Cyprus.
