Tax break scheme for foreign high earners a success

The tax break scheme for attracting foreign high earners and bringing in qualified professionals to sectors such as IT has been a success, said the permanent secretary at the finance ministry, Giorgos Panteli.

“Since February 2022, approximately 1,600 foreign companies with some 14,000 employees combined have taken advantage and relocated their HQs to Cyprus,” he said.

On July 4, a press release appeared in the media, by which the Tax Department was notifying the public that an amending law providing for income tax exemptions for non-tax residents of Cyprus had come into effect, and that the relevant tax form would soon be made available for download.

The income tax exemptions relate to persons who were not tax-resident in Cyprus for a period of 15 years prior to their first employment here, and whose annual income exceeded €55,000. Previously, the law concerned persons with an annual income of more than €100,000.

Eligible persons are taxed on only 50 per cent of their declared income – a major perk.

The scheme is billed as part of efforts to attract highly-paid professionals to Cyprus, and to encourage foreign companies – such as IT companies – to move their headquarters here.

The tax break is applicable/available for a maximum period of 17 years. If during any year of employment in Cyprus a person’s income is less than €55,000, that person will not qualify for the tax exemption for that year.

But as the scheme now stands, a person can still qualify even if they switch employers in Cyprus.

The scheme, Panteli said, was targeted at middle and upper management positions – it created ‘value’ for the country and helped drive growth.

Asked about the corporations that have moved here, Panteli did not want to name names but said that for the most part they are ICT (Information and Communication Technologies) companies.

“Others are into bottling, some into exports of goods. They include known brands.”

On the question of potential discrimination – given that some qualify for these tax breaks, others don’t – and whether the European Commission might have something to say about this, the official said no such issue exists.

The scheme applies to any non-tax residents of Cyprus who meet the specified criteria – EU nationals, non-EU nationals, even Cypriot nationals who were not tax residents here.