Living and Working in Cyprus
A guide on residence and working permit requirements for living and working in Cyprus, including a summary of key facts relating to the Cyprus personal income tax system
An EU-national or EEA-national (Iceland, Liechtenstein, Norway and Switzerland) can enter and stay in Cyprus for three months without completing any formalities. If an EU-national or EEA-national, wishes to live and work in Cyprus for a longer period, a short registration process would have to be completed in Cyprus, obtaining a Registration Certificate for EU-Nationals/EEA- nationals (also known as the ‘yellow slip’).
A non-EU/EEA national would be required to apply for an Immigration Permit (also known as the ‘pink slip’) to live and work in Cyprus and there are different categories of Immigration Permits issued, primarily depending on the type of work carried out.
We will concentrate in this short guide on two types of permits for non-EU nationals, one relating to digital nomads living and working in Cyprus and the other one relating to non-EU nationals relocating to Cyprus to work for companies operating in Cyprus.
Digital Nomads’ Permit for workers in global gig economy and freelance entrepreneurs
An increasing number of the global talent workforce is adopting an independent, freelance, and remote working model, allowing talented professionals to work from anywhere in the world.
The global gig economy exists due to internet connectivity and technology. Remote working is now considered a well-established practice and international companies are open to engaging individuals as part of their remote working policy, who live and work anywhere in the world.
Cyprus has introduced a Digital Nomads Immigration Permit to allow non-EU nationals who work flexibly, remotely and use technology to perform their work, to live and work in Cyprus.
This type of temporary immigration permit is particularly popular for people working in global organisations, taking up IT, HR, marketing, executive and other managerial roles.
The benefits of the Cypriot Digital Nomads Permit are that a non-EU national can:
live and work in Cyprus for up to one year, with the possibility to renew this for up to two more years,
relocate their family in Cyprus for the same period for which the Digital Nomads Immigration Permit has been issued (provided such family members do not work in Cyprus),
obtain tax residency in Cyprus and pay taxes in Cyprus (as further explained in Cyprus Personal Income Tax below).
During the application process the applicant for a Digital Nomads Permit must demonstrate that she/he:
works remotely using information and communications technology,
works remotely via a self-owned company or another company, located outside of Cyprus or is self-employed and his/her customers are located outside Cyprus,
receives sufficient and adequate monthly income to support their living in Cyprus, of at least €3,500, after the deduction of mandatory contributions and taxes (where such minimum requirement is increased by 20% if a spouse will relocate with him/her and by additional 15% for every child that will relocate with him/her),
holds a clean criminal record certificate from the country of residence,
holds a medical insurance that covers the in-patent, out-patient and transportation of mortal remains.
Residence and working permits for non-EU nationals employed by Companies of Foreign Interests operating in Cyprus
Cyprus has developed the “Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus” on October 15th, 2021. This strategy marks a significant initiative aimed at enhancing Cyprus' position as a premier business hub by attracting international investments and talent. The strategy involves a comprehensive review and simplification of the existing investment policy, leading to the introduction of several reforms. One of the critical aspects of this strategy is the establishment of the Business Facilitation Unit (BFU), which aims to expedite the process for foreign companies to set up or expand their operations in Cyprus.
On November 30, 2022, the Council of Ministers in Cyprus approved significant amendments to the policy for registering companies in the Register of Foreign Interest Companies. These amendments, effective from December 12, 2022, introduce new eligibility criteria and emphasize the requirement for foreign companies to make an initial investment of at least €200,000 in Cyprus. This investment can be evidenced through various means such as bank statements or proof of expenditures on office space or equipment.
The revised policy outlines specific criteria that companies must meet to qualify as foreign interest companies in Cyprus, offering them the strategic benefit of relocating non-EU skilled employees to Cyprus. These criteria are designed to ensure that genuine business investments are made, thereby contributing to the Cypriot economy.
The key eligibility criteria include:
Majority Share Ownership: Companies where the majority of shares are owned by third-country nationals.
Minority Share Ownership: Companies where the foreign shareholding is 50% or less, provided the foreign participation is valued at least €200,000, in addition to the initial €200,000 investment.
Public Companies: Registered on recognized stock exchanges.
International Activity Companies: Formerly off-shore companies with historical data held by the Central Bank.
Cypriot Shipping Companies.
High-Tech/Innovation Companies: Meeting specific criteria for R&D intensity and product development in high-tech sectors.
Pharmaceutical and Biogenetics Companies.
Companies Owned by Naturalized Cypriots: Those who acquired citizenship based on economic criteria.
Private Institutes of Tertiary Education: Licensed by the Ministry of Education, Sport, and Youth.
Definition of High-Tech Companies
A high-tech company, for the purposes of registration in Cyprus, must meet the following criteria:
Established Presence: The company must already be established and have a presence in the market.
High R&D Intensity: The company should exhibit a high level of research and development (R&D) intensity, indicating significant investment in innovation and development activities.
Product Development: The company must have developed products that fall into one or more of the following categories: products related to aviation and space industry, computers, information and telecommunication technology (ICT), pharmaceuticals, biomedical, research and development equipment, electrical machinery, chemicals, non-electrical machinery.
This relocation program applies to relocation of:
o Highly skilled non-EU/EEA nationals, provided following criteria are met:
they will be paid a minimum gross monthly salary of € 2,500;
they will hold a university degree or diploma or equivalent qualification or confirmation of relevant experience in a corresponding employment position of at least 2 years duration; and
they submit an employment contract of not less than two years.
The maximum number of non-EU/EEA nationals that can be relocated and employed in Cyprus is set at 70% of all employees of Cyprus company over a period of 5 years, from the date of joining this relocation program. After the lapse of 5 years, if it is not possible to employ 30% of Cypriot workers, the matter will be re-examined on a case-by-case basis.
o Support staff from non-EU/EEA countries, provided following criteria are met:
They will be paid a gross monthly salary of less than € 2,500;
Employment of such support staff does not exceed 30% of the total support staff employed by the Cyprus company; and
There is an employment contract between the non-EU/EEA national and the employer which is duly validated in accordance with current legislation.
This relocation program provides a right for family reunifications for spouses whose family member has obtained a residence and work permit in Cyprus under this program, and who receive a minimum gross monthly salary of € 2,500 (excluding support staff).
By taking advantage of these opportunities, companies can effectively relocate non-EU skilled employees, contributing to the overall growth and the economic development of Cyprus.
Cyprus Personal Income Tax
Cyprus personal income taxes operate under a progressive system. There is a lower tax rate applicable for low-income earners and higher tax rates for high-income earners.
Any person that is deemed tax resident of Cyprus is taxed in Cyprus for the worldwide income which accrues or arises from sources that come within Cyprus or outside Cyprus.
An individual will be considered a tax resident of Cyprus if she/he spends more than 183 days (six months and one day) in a tax year in Cyprus.
Alternatively, an individual may also be considered a tax resident of Cyprus under the ’60-day tax residency rule’ if:
spends at least 60 days in Cyprus; and
does not spend more than 183 days in any other country; and
is not a tax resident of any other country; and
maintains a permanent home in the Cyprus that is either owned or rented; and
carries on a business in Cyprus, i.e. is employed in Cyprus or holds an office in Cyprus at any time during the tax year.
The applicable tax income tax rates in Cyprus are the following:
Personal income tax allowances are limited to 1/5 of the net taxable income before the allowances are deducted. These allowances include local social insurance contributions, contributions to the Cyprus General Healthcare System, contributions to approved provident and pension funds, contributions to medical or other approved funds, as well as, the life insurance premiums.
Note that certain exemptions apply to the Personal Income Tax, which include, among others, exemption from whole income received from dividend income, exemption from whole income received from interest income (excluding interest income arising in the ordinary course of business or closely connected with the ordinary carrying on of the business.
There are two key tax exemptions on personal income tax for staff relocating to Cyprus:
20% Income Tax Exemption: This exemption allows for a personal income tax exemption of twenty percent (20%) on remuneration (up to a maximum amount of exemption of EUR 8,550 per annum) applies for first employments commencing after the 26 July 2022 exercised in Cyprus by individuals who immediately prior to the commencement of their employment in Cyprus were not a resident of Cyprus for a period of at least three consecutive tax years and were employed outside of Cyprus by a non-resident employer. For each individual, the exemption will apply for a period of seven years, starting from the tax year following the tax year of commencement of employment. This exemption is applicable until 2025.
50% Income Tax Exemption: This exemption provides a personal income tax exemption of fifty percent (50%) on the remuneration from the first employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of their employment in Cyprus. This exemption applies for a seventeen-year (17) period, starting from the year of employment, provided that the said income exceeds fifty-five thousand Euros (€55,000) annually. An employee is considered as exercising 'first employment' in Cyprus if they did not exercise any salaried services (including occasional employment) in Cyprus, either for a local or a foreign employer, for a 15-year consecutive period immediately prior to the aforesaid employee taking up employment in Cyprus.
If you want to know more about the living and working in Cyprus or about the tax system in Cyprus, please contact us.