The Tax Department of Cyprus has made a clarification on its earlier circular EE 2017/4 from 24 July 2017 regarding the income tax exemption for expats, who have not previously resided in Cyprus and are currently employed in Cyprus, under article 8(23) of the Income Tax Law.
The Income Tax Law states that an individual who was not previously a resident in Cyprus and who is now employed in Cyprus may benefit from a 50% tax exemption on earnings from their employment but only if these earnings exceed EUR 100,000 per year. This exemption does not apply if the expat was a tax resident of Cyprus for the tax year immediately prior to the commencement of employment or three or more of the five years prior to the beginning of employment. The exemption is valid for 10 years.
It should be noted that the type of income is taken into account for purposes of this exemption. Earnings from employment should include all earnings derived from the employment relationship, regardless of whether or not they are part of the salary. For example, if an individual receives remuneration from a company in a managerial or executive capacity, and receives remuneration as a non-executive director, all remuneration is aggregated for the purposes of determining the eligibility to the exemption.
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