Minds in Cyprus

  1. Home /
    2. Publications /
  2. Minds in Cyprus
Minds in Cyprus
Publications

Minds in Cyprus

Issue N-4-2026, 17 March 2026

 

Overview

On 26 February 2026, the Cyprus Parliament approved an amendment to the Income Tax Law of 2002 through amending Law 17(I)/2026, introducing new Article 8(21B). The amending law was published in the Official Gazette on 6 March 2026.

The new Article provides tax incentives intended to attract skilled individuals to Cyprus and encourage the return of Cypriot citizens. This measure is anticipated to support sustainable economic development.

 

In detail

Under the newly introduced Article 8(21B) of the Income Tax Law of 2002, an individual may qualify for a tax exemption equal to 25% of remuneration earned from employment exercised in Cyprus, or 25% of profits arising from carrying on a business in Cyprus. The maximum exemption available is EUR 25.000 per tax year.

This exemption is available to an individual who satisfies all of the following conditions:
  1. He/She is a Cyprus tax resident (except, possibly, in the tax year in which he/she begins employment in Cyprus or starts carrying on a business in Cyprus); and
  2. The commencement of employment in Cyprus, or the start of carrying on a business in Cyprus, occurs during the period from 1 January 2025 to 31 December 2030; and
  3. Within the 12 months immediately after the date of commencement of employment in Cyprus, or commencement of carrying on a business in Cyprus, he/she received remuneration from employment in Cyprus, or profits from carrying on a business in Cyprus, in excess of EUR 30.000; and
  4. He/She was not a Cyprus tax resident for the 7 tax years before the tax year in which he/she started employment in Cyprus or began carrying on a business in Cyprus; and
  5. He/She had been a Cyprus tax resident in at least one tax year before the 7 tax years referred to in point (d) above; and
  6. He/She satisfies at least one of the following two requirements:
(i)

He/She holds a recognised university degree, as recognised by the Cyprus Council for the Recognition of Higher Education Qualifications (ΚΥ.Σ.Α.Τ.Σ.) for equivalence purposes, and he/she was employed full-time outside Cyprus by an employer that is not a Cyprus tax resident for a total period of at least 36 months (3 years) during the 84 months (7 years) before the month in which he/she commenced employment in Cyprus or started carrying on a business in Cyprus,

Note: Our understanding is that the Cyprus tax authorities may intend to interpret this provision as meaning that the 84 months may be any 84-month period prior to the commencement of employment/business in Cyprus, i.e. they may adopt a broader interpretation. However, it may also be argued that the wording of the law suggests that the relevant 84 months are those immediately preceding the commencement of employment/business in Cyprus;

or

 

(ii)

He/She was employed full-time outside Cyprus by an employer that is not a Cyprus tax resident for a period of 84 months (7 years) before the month in which he/she started employment in Cyprus or began carrying on a business in Cyprus;

Note: It is clear that the 84 months may be any time before the commencement of employment/business in Cyprus.

It is further provided, among other things, that:
  • The exemption applies for the tax year in which the individual commences employment in Cyprus or starts carrying on a business in Cyprus, as well as for the following 6 tax years, provided that in each such tax year the individual’s remuneration from employment in Cyprus, or profits from carrying on a business in Cyprus, exceed EUR 30.000;
  • Where this new 25% exemption is granted, the exemption under Article 8(21A), namely the 20% exemption, is not available;
  • Where the exemption under Article 8(23A), namely the 50% exemption, is granted, this new 25% exemption is not available;
  • The exemption may be granted to each individual only once during his/her lifetime, for the tax years to which the provisions of Article 8(21B) apply.

The provisions of the new Article 8(21B) apply with effect from 1 January 2025.

 

The takeaway

The new Article introduces tax incentives designed to attract skilled workers to Cyprus and to encourage the return of Cypriot citizens. This initiative is expected to make a positive contribution to sustainable economic growth.

 

Let’s Talk

For a more detailed discussion on how this matter may affect your business, please contact:

Christos Andreou

Tax Manager
c.andreou@arosalaudit.com