Quick Answer

Cyprus residents who first start employment in Cyprus after at least 10 years of non-residency can exempt 50% of employment income exceeding EUR 100,000 for up to 10 years, under Article 8(23A) of the Income Tax Law. A founder earning EUR 200,000 from their Cyprus company pays income tax on just EUR 100,000 - cutting the effective rate from 29% to approximately 12%. The exemption can be combined with Non-Dom status on dividends.

Cyprus 50% Salary Exemption: Halve Your Income Tax as a New Resident

Article 8(23A) of the Cyprus Income Tax Law allows qualifying new residents to exempt 50% of employment income from income tax for up to 10 years. For founders and executives taking a salary above EUR 100,000 from a Cyprus company, this is one of the most significant tax benefits available in the EU.

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Who qualifies for the Cyprus 50% salary exemption?
Individuals who were not Cyprus tax residents for at least 10 of the 15 tax years immediately before starting employment in Cyprus, earn over EUR 100,000 in annual employment income, and are employed by a Cyprus company or Cyprus permanent establishment. Founders employed by their own Cyprus Ltd qualify if the salary exceeds the threshold.
How long does the 50% salary exemption last in Cyprus?
The exemption runs for a maximum of 10 tax years from the first year of employment in Cyprus. It cannot be extended. After the period ends, the full employment income is subject to standard progressive income tax rates.
Can founders employed by their own Cyprus company use this exemption?
Yes. A founder who incorporates a Cyprus Ltd and takes a director or employment salary exceeding EUR 100,000 can qualify, provided they meet the prior residency condition and the employment is documented with a proper contract at a commercially justified salary.
Can the 50% exemption be combined with Non-Dom status?
Yes. The 50% exemption (Article 8(23A)) and Non-Dom status are independent provisions. A qualifying individual can apply the 50% exemption to salary income and separately benefit from Non-Dom rules on dividends - paying only 2.65% GHS with 0% income tax and 0% SDC.
What is the difference between the 20% and the 50% salary exemption in Cyprus?
The 20% exemption (Article 8(21), capped at EUR 8,550) applies to individuals earning under EUR 100,000 and runs for 5 years. The 50% exemption (Article 8(23A)) applies to individuals earning over EUR 100,000 and runs for 10 years. The two cannot be combined in the same tax year.
Do GHS contributions still apply during the exemption period?
Yes. GHS (General Healthcare System) contributions apply to the full employment income including the exempt portion. The employee GHS rate on salaries is 2.65%, capped at EUR 180,000 of annual income. Social insurance contributions also apply up to the annual ceiling set by the Social Insurance Services.
What is the effective income tax rate on EUR 200,000 salary with the exemption?
Approximately 11.65%. Only EUR 100,000 (the taxable 50%) is subject to income tax. Tax on EUR 100,000 under the 2026 bands is EUR 23,300. Divided by the full EUR 200,000 salary, the effective rate is 11.65%. Without the exemption, the effective rate on EUR 200,000 would be approximately 29.15%.
Does the exemption apply if I previously lived in Cyprus?
It depends on how long ago. The law requires you were not a Cyprus tax resident for at least 10 of the 15 years before starting employment in Cyprus. If you left Cyprus fewer than 10 years ago you would not qualify. If you left more than 10 years ago and meet the other conditions, you may still qualify.

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