Cyprus

Individual - Significant developments

Last reviewed - 21 December 2023

Cyprus is expanding and updating its double tax treaty (DTT) network. A Protocol to the Cyprus-Germany DTT became effective on 1 January 2022. Finally, a first-time Cyprus-Netherlands DTT entered into force as of 30 June 2023 and is effective as of 1 January 2024. Finally, a first-time Cyprus-Croatia DTT was signed and entered into force in 2023, and became effective as of 1 January 2024. 

Cyprus is an early adopter of the Common Reporting Standard (CRS) on automatic exchange of financial account information and also has signed an intergovernmental agreement (IGA) with the United States (US) for the Financial Account Tax Compliance Act (FATCA).

Cyprus signed the Multilateral Convention to Implement Tax Treaty Related Measures (MLI) to Prevent Base Erosion and Profit Shifting (BEPS) on 7 June 2017. Subsequently, Cyprus ratified the MLI on 23 January 2020. The date of 'entry into effect' as regards Cyprus’ application of the MLI for any particular bilateral DTT covered by the MLI depends upon various possible legal processes/options by the other contracting party jurisdiction.

Over the last three years Cyprus has also successfully transposed into its legal and tax framework all European Union (EU) Directives on Administrative Co-operation and Mutual Assistance (i.e. DACs 1-5). Furthermore, on 30 March 2021 the law transposing the DAC6 Directive entered into force with retroactive effect covering transactions from 25 June 2018 and onwards.

Further, on 18 March 2021, the House of Representatives of the Republic of Cyprus approved the Law on Administrative Cooperation in the field of Taxation (Law N. 205(I)/2012) implementing the EU Directive 2018/822 (DAC6) on mandatory reporting and exchange of information of cross-border arrangements. The law transposing the DAC6 Directive was published in the Official Gazette of the Cyprus Republic on 31 March 2021 and entered into force immediately with retroactive effect covering transactions from 25 June 2018 and onwards.

As of 1 January 2022, new personal income tax (PIT) exemptions have been introduced for first employments exercised in Cyprus and on 30 June 2023 further amendments were implemented. More specifically, a new 50% exemption applies as of 1 January 2022 for remuneration of “first employment” exercised in Cyprus commencing as of 1 January 2022 with remuneration exceeding 55,000 euros (EUR) per annum, subject to certain conditions. Individuals whose employment commenced prior to 1 January 2022 may also be eligible to transition into the new 50% exemption. Additionally, a new 20% exemption applies as of 26 July 2022 for first employments exercised in Cyprus commencing as of 26 July 2022, subject to certain conditions.

Τhe tax incentives relating to investments in innovative small and medium-sized enterprises (SMEs) has been extended to 31 December 2026.