Income tax is money that you have to pay to the government based on how much money you earn. If you are a tax resident of Cyprus, you'll pay income tax on your income from sources inside and outside Cyprus. If you're not a tax resident of Cyprus, you'll only pay income tax on certain income you earn within Cyprus.

Income tax in Cyprus is progressive, which means that the more you earn, the more tax you'll have to pay. However, different parts of your income are taxed at different rates.

Remember, your income isn't just your salary from your job. You must include all types of income, with only certain exceptions and deductions we'll discuss below.

Then, after making the applicable deductions and finding your total taxable income you can determine which tax bracket you fall into and how much income tax you need to pay.

However, just because you fall under a specific tax bracket does not mean that you'll pay that percentage on your entire income.

Before making your calculations, you must check if any of your income falls within exempted categories or if any deductions apply. These exemptions and deductions can lower your taxable income and reduce the amount of income tax you must pay.

There are several types of income in Cyprus that are not counted when calculating income tax.

There are also a number of deductions you can claim that can potentially put you in a lower tax bracket or simply reduce the overall amount of tax you must pay.

If you are self-employed/sole-trader then you can also deduct any expenses used entirely for generating income for your business.

You can also claim Wear and Tear allowances for your business. You can see a list of them here.

Keep in mind that if you are a self-employed individual, there are certain expenses that you cannot deduct. You can see a list of them here.

To better understand how income tax is calculated in Cyprus, I'll lay down a practical example using the scenario of having a full-time office job, selling handmade candles as a side hustle, and earning rental income from an apartment with some made up figures.

You can calculate your income tax using our tax calculator.

As an individual, to submit your tax returns and pay your income tax, you have to get a Tax Identification Number. To do that:

From 2020 and onwards, all individuals who have taxable income are generally required to submit personal income tax returns every year. This obligation applies even if, after deductions, you are not liable to pay any income taxes.

However, the Council of Ministers can issue a decree each year that exempts individuals whose gross income does not exceed €19,500 from the obligation to submit a tax return.

In the last few years, the Council has issued such decrees, exempting these individuals. Nonetheless, there is no guarantee that this exemption will be issued every year, so you should be aware of this and check annually whether you must submit tax returns.

The deadline for submitting your tax returns for 2023 has been extended to the 31st of October 2024.

Tax returns are submitted online through TaxisNet.

The deadline is the 31st of July of the following year.

Suppose you are both an employee and self-employed, meaning that you have income from a salary as well as regular income from a self-employed business. In that case, you must complete both an income tax return as an employee as well as an income tax return as a self-employed person.

You can find a detailed guide on how to complete your income tax return here.

Once you have submitted your tax returns, you will then have to pay the applicable taxes, if any.

You can find a detailed guide on how to pay your income tax here .

Employees whose net salary is over €19,500 and are therefore subject to income tax, don't have to pay it themselves.

Instead, there is the PAYE (Pay As You Earn) system in Cyprus, where income taxes owed by employees are paid directly through their employers. At the beginning of each year, employees must complete the form T.D.59A, detailing all earnings and personal allowances, and give it to their employer.

Using the information provided in that form, the employer can calculate your tax obligation.
Each month, the employer will deduct the appropriate amount of tax from your salary and pay it to the Tax Department on your behalf. PAYE payments must be made by the end of the following month for which they are due.

However, this does not mean that you're not required to submit tax returns. Until the 31st of July each year, employees must file their tax returns to confirm they've paid the correct amount of income tax. If more tax is owed, they pay the difference; if they overpaid, they receive a refund.

If you're self-employed and you have income other than salaries, dividends, pensions and interest, such as profits from your sole trader business or rental income, you are required to pay provisional tax, which involves paying your taxes in advance based on your estimated income for the year.

This is also applicable to employees who have income other than their salary from employment, such as rental income. Provisional Tax payment should be made in two equal instalments on the 31st of July and the 31st of December.

In case that, during the year you realise that you have either overestimated or underestimated your income for the year then you can submit a revised provisional tax calculation by the 31st December through the Tax Portal.

However, if your initially declared taxable income was less than 75% of your actual income for the year and you haven't submitted a revised tax calculation by December 31st, you will be liable to pay a 10% fine on the difference between the final tax due and the provisional tax paid.

On the contrary, if you overestimated your taxable income and ended up paying more provisional tax than you owed, you can claim a refund for the excess tax paid.

Self-employed individuals whose annual turnover exceeds €70,000 must prepare audited financial statements. Also the tax returns date of submission is the 31 March of the second year following that tax year.