On 26 July 2022, the House of Representatives in Cyprus voted amendments (under Article 8(23A) of tax regulations and incentives for the first employment income under certain conditions.
On 1 November 2022, the Tax Department has issued clarifications (circular no. 10/2022) on Articles 8(21A) and 8(23A).
The Circular focuses on the following clarifications:
· First employment
· Remuneration from the first employment
· Tax resident
· Which specific article is applied 8(21), or 8(21A), or 8(23) or 8(23A)
· Related parties of the individual
The 50% exemption under the Article 8(23A) of the Income Tax Law
In order to meet the 50% exemption, the first employment must be commenced from or after 1 January 2022 and the following major conditions must be affected under specific regulations:
· The individual has not been a Cyprus tax resident for at least 10 consecutive years prior of its first employment in Cyprus.
· The annual remuneration from the employment in Cyprus exceeds the amount of €55.000. Individuals who can’t meet the tax exemption for the 50%, can be eligible to claim a 20% tax exemption.
In addition to the above conditions, an exemption under the Article 8(23A) can also be granted in the following provisions:
· Individuals who previously claimed the exemption under the old rules of Article 8(23A) and had continuous employment in Cyprus from the year of commencement of employment until the tax year 2021, or
· Individuals who commenced first employment in Cyprus between the years 2016 to 2021 with remuneration exceeding the amount of €55.000 per year, or
· Individuals who commenced first employment in Cyprus between the years 2016 to 2021 with remuneration not exceeding the amount of €55.000 per year and within 6 months from the date of the publication of the amendment legislation on 26 July 2022, the annual remuneration exceeded the threshold of €55.000.
Based on the following articles/circulars of the new tax legislation –
• Article 8(23A)
• Circular 10/2022 on Articles 8(21A) and 8(23A).