Cyprus Raises Income Tax Threshold

by Lorys Charalambous, Tax-News.com, Cyprus

15 October 2007

The Cyprus House of Representatives has approved new measures that would increase the threshold at which income tax becomes payable in Cyprus.

The amendment, part of the proposed social cohesion measures, would mean that no income tax is payable on the first CYP10,750 (EUR18,400) of income for 2007. This threshold will increase to CYP11,350 for 2008.

Prior to these changes, the income tax threshold stood at CYP10,000 of an individual's income. Tax was then payable at 20% on income between CYP10,000 and CYP15,000; at 25% on income between CYP15,001 and CYP20,000; and 30% on income over CYP20,001.

Tax residence in Cyprus is defined as presence in the country for more than 183 days in a calendar year (which is the tax year), and then applies to the whole year. Resident individuals are subject to tax on their world-wide income; non-residents are taxed only on certain types of income arising in Cyprus. Foreign investment income is charged at 5% on amounts over CYP2,000 pa, provided that the individual is neither resident nor Cypriot, nor has economic activity on the island.

The House of Representatives also approved provisions as part of the same bill that would reduce consumption tax on heating oil by CYP0.04 per litre, following the recent spike in global oil prices.

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