1. Introduction of new tax exemption (section 8 amendment)

A new subsection (21B) has been added to section 8 of the Income Tax Law, providing a 25 per cent tax exemption on income from employment or business profits in Cyprus, capped at €25,000 per tax year. This exemption applies under the following conditions:

• The individual must be a resident of Cyprus, starting employment or business activity in Cyprus between 1 January 2025 and 31 December 2030.
• During the first 12 months of employment or business activity, the individual must have earned over €30,000 in income.
• The individual must not have been a resident of Cyprus for the seven tax years preceding the start of employment or business activity.
• The individual must have been a resident of Cyprus at least once prior to the seven-year period mentioned above.
• The individual must meet at least one of the following criteria:
  • Hold a recognised university degree and have worked full-time outside Cyprus for a non-Cypriot employer for at least 36 months within the last 84 months.
  • Have worked full-time outside Cyprus for a non-Cypriot employer for 84 consecutive months prior to starting employment or business in Cyprus.

Additional notes:

• The exemption is granted for the year employment or business activity begins and the subsequent six tax years, provided annual income exceeds €30,000.
• This exemption cannot be combined with the exemption under subsection (21A).
• The exemption is granted once per lifetime for eligible individuals.

This exemption is part of the "Minds in Cyprus" initiative, a strategic framework designed to attract skilled professionals and entrepreneurs to Cyprus, leveraging their global expertise to contribute to the country’s economic growth.

2. Other tax exemptions for relocating/returning individuals

In addition to the new 25 per cent tax exemption under section 8(21B) of the Income Tax Law, two other tax exemptions are currently in force to encourage individuals to relocate or return to Cyprus:

a. 20 per cent exemption (section 8(21A))

Under section 8(21A), individuals may claim a 20 per cent exemption from income tax, up to a maximum of €8,550 per tax year, on emoluments from their first employment in Cyprus, provided that:

• They have not performed any employment in Cyprus for the last 15 years; and
• They were employed outside Cyprus by a non-Cypriot employer for the 3 years immediately before starting their first employment in Cyprus.

This exemption is granted for 7 years, starting from the year following the commencement of employment. It is applicable for employment starting on or before 31 December 2027.

b. 50 per cent exemption (section 8(23A))

Under section 8(23A), individuals may claim a 50 per cent exemption from income tax on emoluments from any employment exercised in Cyprus, provided that:

• They have not been a tax resident of Cyprus or exercised any employment in Cyprus for at least 15 consecutive years immediately before starting their first employment in Cyprus; and
• Their employment emoluments for the first or second year of employment in Cyprus exceeded €55,000.

This exemption is granted for 17 years. However, if this exemption is granted, the tax exemptions provided in sections 21, 21A, 21B and 23 do not apply.

3. Non-domicile (Non-Dom) regime and section 8(21B)

The Non-Dom regime operates independently of section 8(21B). Under the Non-Dom regime, individuals are exempt from paying Special Defence Contribution (SDC) on income derived from dividends and interest.

In contrast, section 8(21B) provides an income tax exemption on remuneration from employment exercised in Cyprus or profits from a business carried out in Cyprus.

These two exemptions are not mutually exclusive and may be claimed simultaneously, allowing eligible individuals to benefit from both regimes concurrently.

4. Effective date

The amendments are retroactively effective from 1 January 2025.

The Income Tax Amending Law can be found here