The island of Cyprus is a well-known place for setting up business headquarters and even transferring businesses altogether to with entire employee teams.
One of the major benefits of the above decision to foreign companies is the prevailing friendly attitude towards investors, favourable tax system, and the location itself. All this has made Cyprus one of the key jurisdictions for business worldwide.
The Cyprus government has always been seeking for new ways to attract foreign investors and to convince them to relocate their business operations to this beautiful island.
Thus, we have some good news about the recent developments in the field of labour taxation in Cyprus, which shall make setting up a business in Cyprus even more attractive for foreign capital.
New tax incentives
On 15 July 2022, the House of Representatives of Cyprus has approved of a new tax incentive scheme to attract foreign companies to relocate their headquarters to Cyprus.
The new tax scheme can be very attractive for companies employing highly-skilled employees.
As per the new law, an exemption amounting to 50% of income tax payable from the employment income earned by the taxpayers residing in Cyprus will apply.
In order to benefit from the newly approved taxation scheme, the employees shall meet the following two criteria:
- they shall not be taxpaying residents of Cyprus for a period of at least 12 consecutive years prior to the start of their employment in Cyprus;
- their gross salary shall exceed EUR 55.000 per year.
The new tax amendments will apply for a period of 17 years.
The new development is to become a very attractive tool for companies to employ their staff in Cyprus, including setting up their headquarters in the island, and encourage the relocation of business operations to Cyprus altogether.
This is how it will look like in practice. With the new taxation scheme in place, an employee with a gross annual salary of EUR 60,000 EUR will only pay approximately EUR 800 in taxes per year.
After deducting social and health insurance (GESY) contributions, the net monthly salary of the employee will be approximately EUR 4,400. Thus, the effective total tax rate will only be 7,3%.
Our experts are ready to advise on the possibility to setup a business, develop business plans and assist with setting up a fully operational office in Cyprus.