Cyprus is well regarded as a beneficial location for setting up business headquarters, or even for the relocation of the whole business, including its staff, so they can live and work on this beautiful island.
One of the major benefits of such a decision for international companies, is the prevailing friendly attitude towards investors, a favourable tax system, and as mentioned, the location itself. All this has made Cyprus one of the key jurisdictions for business worldwide.
Its government is always looking for new ways to attract foreign investors and convince them to relocate their business operations to the island.
The good news is, recent developments, in the field of personal income taxation, will make setting up a business there even more attractive to international capital.
New tax incentives
On 15 July 2022, Cyprus’s House of Representatives approved an additional tax incentive scheme to attract foreign companies to relocate their headquarters to the island.
The new legislation provides for an exemption amounting to 50% of an employees’ personal income tax—normally paid by the those residing in Cyprus—and will be particularly attractive to companies employing highly-skilled expat staff. The amendment will apply for a period of 17 years.
To be eligible to benefit from the newly approved taxation scheme, employees will be required to satisfy two criteria. Their gross salary must exceed 55,000 euros per annum and they must not have been resident in Cyprus for a minimum period of 12 consecutive years, prior to the start of their employment in the country.
This new development will be an appealing tool for companies when setting up their headquarters on the island and looking to attract staff to work in Cyprus. It could well encourage companies to transfer business operations as a whole.
How might this new provision work in practice?
Under the new taxation scheme, if we consider an employee with a gross annual salary of 60,000 euros, they would only be paying approximately 800 euros in taxes per annum.
After the deduction of social and health insurance contributions (GESY), the net monthly salary, in this example, would be approximately 4,400 euros. In effect, the total tax rate will be only 7.3%.
We are ready to help you make the most of the recent improvements in income tax provisions. Let ITS deliver the expert support that allows you to get on with the business of running a successful operation.