Overview of taxes in Cyprus
Cyprus is one of the most attractive places to work and live, especially for IT professionals. A simple tax system and significant benefits for foreign specialists make this jurisdiction one of the most favorable in Europe for work.
The tax system in Cyprus includes a progressive income tax rate of up to 35%, social insurance contributions, and mandatory health insurance contributions (GESY). Additionally, residents can benefit from tax deductions and exemptions, which are particularly advantageous for new employees and high-income professionals.
In Cyprus, as in most European countries, quoting salaries in gross (before taxes) is a standard practice. Employers typically deduct taxes and social contributions, while employees receive a net salary.
However, employees still have financial obligations beyond standard deductions. This includes filing tax returns, ensuring compliance with any additional tax requirements, and keeping track of potential benefits or exemptions. Understanding these obligations is essential for managing your income effectively, avoiding unexpected liabilities, and ensuring full compliance with tax regulations.
What is the Progressive Tax Scale?
Cyprus uses a progressive tax scale, where the tax rate increases as income rises. Income up to a certain threshold is not taxed at all, which benefits residents with lower incomes.
| Income Range (€) | Tax Rate |
|---|---|
| €0 – €19,500 | 0% |
| €19,501 – €28,000 | 20% |
| €28,001 – €36,300 | 25% |
| €36,301 – €60,000 | 30% |
| €60,001 and above | 35% |
🧾 For example, an employee with an annual income of €40,000 will only pay taxes on amounts exceeding €19,500, with the applicable tax rate for each income bracket.
It’s important to note that employment contracts in Cyprus typically state the annual gross remuneration, which is the income amount before taxes and deductions. This allows employees to clearly understand their financial obligations.
Tax Residency and Double Taxation
Cyprus uses the 183-day rule to determine tax residency. You become a tax resident if you reside in the country for more than 183 days in a year. For those meeting certain conditions (employment, housing, and no tax residency in another country), the 60-day rule also applies.
An additional advantage is Cyprus’s double taxation agreements with 67 countries, which prevent individuals from being taxed twice on the same income.
Key Taxes and Mandatory Contributions
Employees in Cyprus sign an employment agreement specifying their gross salary (gross remuneration). After taxes and contributions are deducted, they receive their net salary (net remuneration). The key taxes and mandatory contributions include:
Social Insurance Contributions
Mandatory Health Insurance Contributions (GESY)
Income Tax
Social Insurance Contributions
Social insurance contributions are used to fund benefits such as sick leave, maternity leave, unemployment benefits, and other social payments.
In 2025, the contribution rate is 8.8% of your gross salary. These contributions are only applied to monthly salaries up to €5,005 or an annual salary of €60,060. If your income exceeds these limits, no additional contributions are deducted from the excess amount.
💡 Limits and rates are updated annually, with the latest information available on the website of the Ministry of Labour and Social Insurance: https://www.gov.cy/mlsi/en/.
Mandatory Health Insurance Contributions (GESY)
GESY contributions fund the national healthcare system, which provides medical services to all Cyprus residents. These contributions are mandatory.
The contribution rate is 2.65% of your income. Contributions are deducted not only from your salary but also from other types of income, such as rental income, dividends, loan interest, or pensions. However, contributions apply only to total annual income (gross income) up to €180,000. No contributions are deducted from income exceeding this amount.
💡 Limits and rates are updated annually, with the latest information available on the GESY website: https://www.gesy.org.cy/.
Income Tax
Cyprus uses a progressive income tax system where the tax rate increases with income. Each portion of income is taxed at its respective rate.
Taxable income includes wages, rental income, interest, pensions from other countries, and other sources of revenue.
Bonuses, allowances, and other additional payments (e.g., compensation or rewards) are considered part of gross remuneration and are taxed and subject to contributions in the same way as regular salary.
Conclusion
The Cypriot tax system is designed to create comfortable conditions for work and living. A progressive tax scale, reasonable contribution limits, and benefits for new residents allow individuals to minimize their tax obligations while accessing high-quality public services.
While employers are responsible for withholding taxes, making social contributions, and ensuring payroll compliance, employees must verify their tax calculations, declare additional income if applicable, and submit their annual tax returns. Ultimately, the final responsibility for tax accuracy and compliance lies with the employee.
Therefore, it is essential to understand how taxes and contributions are calculated to avoid errors, ensure compliance, and make informed financial decisions.
