Taxation of private school tuition fees, a burning issue


The greatest gift a parent can give to his child is knowledge through proper, holistic and comprehensive education. Education that encompasses values and ideals with which each child will be properly nurtured, thus preparing him to become a global citizen of the future.

In Cyprus, school attendance is compulsory, whether attending a private or a public school under the Primary Secondary Education Law 24 (I) of 1993 and Law 220 (1) of 2004 for Compulsory attendance and provision of Free Education.

Today, the number of students who attend public primary schools is approximately 49,000 and who will later continue to study in public secondary schools.

On the other hand, there are 9,900 students attending private secondary schools and make up approximately 19% of the students’ population at secondary level, while around 4,600 pupils attend private primary schools and make up about 10% of all pupils.

Tuition fees for private schools range from €5,000 to €7,500 per annum and are much lower than per-pupil costs compared with public schools. According to the latest data from the statistical department, the cost per pupil in public primary education is €6,308, while for secondary education the amount is €9,428 per pupil.

Therefore, for each student who chooses to attend a private school, the government essentially saves €10,000 per annum.

Analysing these calculations, one can understand that the Cypriot state saves a great proportion of expenses with regard to education, since a large number of students attends private schools.

Therefore, we can reasonably say that there is a sponsorship to our country's public finances from parents who decide to send their children to private schools, through the tuition fees that they pay and where this amount is taxed.

The oxymoron in this situation is that, instead of recognising this levy and favouring the further development of private education, the state seems to penalise parents by imposing further taxation on their total annual income on the grounds that their children attend private institutions.

One would reasonably wonder why we have reached this conclusion.

There are many reasons that led me to this conclusion, but I will focus on an important one, although I am able to provide many, because the attitude that prevails at the moment on the part of the state towards parents, I dare say, is considered punitive.

For practical reasons, and to be more comprehensible, we will cite the following example:

Most private schools offer the right to teachers and school staff to enroll their children in the private school where the parents work, by offering them reduced or even free tuition in some cases.

It is remarkable though that, although teachers' children in private schools benefit from a discount on the fees, or in some cases. they are entitled to attend the private school for free, something that is a common practice in many private schools where the parents of the children are working staff. Now, under the Cyprus legislation this 'privilege' is considered as a benefit-in-kind to the discount given to parents.

In order to offer more clarifying information, allow me to use the following example:

Assuming that a teacher in a private school - for the sake of the example - has an annual income of €40,000 (forty thousand euros) per annum, whereas the tuition fees of their child in the private school where he works are €10,000 (ten thousand euros) per annum. The teacher, let’s say for the sake of this example, is entitled to 50% discount on the fees.

In the case of the €5,000 which was given as a deduction, the €5,000 which was considered to be the deduction received, is added, based on the legislation, on the taxable income of the teacher-parent who would be taxed, not on €40,000. Because the €5,000 (five thousand euros), which was considered to be the deduction which he received, is added, he will find himself being taxed on the total amount of €45,000.

From the above example we understand that, besides the advantage of the state being exempted from a cost of education for children in the public sector, the State itself then 'punishes' the private sector which exempts the State from these costs by imposing tax on the income of the parents. I believe that this measure is unfair and contradicts the policy that other European countries are following.

What do I mean by that? In order to document the above and, in referring to the principles governing the European Union for free movement, I should also mention the following:

Suppose that a parent from another European country exercises his right to free movement within the European Union:

Once the parent chooses to move within the European Union, in accordance with Community law which allows freedom of movement and in accordance with this fundamental right, he will receive unfavourable treatment, as, by enrolling his children in a private school in Cyprus, he will have to pay additional tax, and especially if that parent happens to be a teacher at that school.

With this example, I would venture to say that the taxation of tuition fees on the basis of legislation is a significant factor in the decision of a parent, especially a teacher, of whether to leave his country of origin and come to Cyprus to work, let alone for his child to attend a private school, as a consequence of the additional tax he will sustain.

In conclusion, I would go so far as to say that the policy that currently exists, and is being implemented, contradicts the fundamental articles of the European Union concerning the free movement of nationals of each EU Member State, according to the Convention of the European Union on Human Rights.

The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Savvas Savvides, Partner at savvas.savvides@Kyprianou.com or contact 26930800.