An amendment to Article 8(23A) of Cyprus income tax legislation was published in June 2023, with retrospective effect from January 1, 2022. The changes affect eligibility for a 50% income tax exemption for first employment in Cyprus.

Notably, the amendment allows individuals who haven’t worked in Cyprus for 15 consecutive tax years to qualify for the exemption. It also permits individuals to change employers and still claim the 50% exemption on employment income. The required period of non-Cyprus tax residency has been extended to 15 years. Existing taxpayers who were eligible under the previous version of Article 8(23A) can continue to benefit from the exemption, provided they meet the old conditions.

Amended Provisions of Article 8(23A):

The definition of “first employment in the Republic” has changed. Now, individuals qualify if they haven’t worked in Cyprus for 15 consecutive tax years, compared to the previous requirement of never having worked in Cyprus before. 1.2. The 50% exemption now applies to income from any employment in Cyprus as long as individuals meet the first employment criteria. 1.3. The period of non-Cyprus tax residency before starting first employment in Cyprus has been extended to 15 years. 1.4. A special provision allows individuals who were eligible under the old rules to continue benefiting from the 50% exemption.

Overview of the Amended 8(23A) Exemption:

Individuals starting first employment in Cyprus from 1st January 2022 onwards, can exempt 50% of their employment income if they:

  • Haven’t been Cyprus tax residents for 15 consecutive years before their first employment.
  • Earn an annual remuneration in Cyprus exceeding EUR 55,000 (achievable in the first or second year of employment).
  • The exemption is available for a maximum of 17 tax years.
  • If the conditions are not met in a specific tax year (e.g., annual remuneration below EUR 55,000), the exemption won’t be granted.

Legacied Provisions:

  • The amended Article 8(23A) provisions apply from January 1, 2022, to individuals who had continuous employment in Cyprus from their first employment year up to and including 2021, and who were non-residents for 15 consecutive years before their first employment in Cyprus.
  • These provisions also apply to individuals whose first employment in Cyprus started between 2016 and 2021 with remuneration exceeding or not exceeding EUR 55,000 annually.
  • Individuals who started employment in Cyprus between 2016 and 2021 with remuneration below EUR 55,000 can benefit if their remuneration exceeds EUR 55,000 within six months from a specified date in 2022.

The amendment to Article 8(23A) of Cyprus income tax law, effective from January 1, 2022, allows more flexibility for eligible individuals, including changing employers while still claiming the 50% exemption. The extension of the non-Cyprus tax residency period to 15 years balances this change. Existing taxpayers can still benefit from the old exemption if they meet the previous criteria.