Amendments to Article 8(23A) of the Income Tax Law of 2002 (118(I)/2002)

On the 30 June 2023, the Amending Law 51(I) of 2023 which amends the Income Tax Law of 2022 (118(I)/2002) (hereinafter the “Income Tax Law”) and more specifically sub-article 23A of Article 8 was published in the Official Gazette of the Republic of Cyprus. In the present Article, a summary of the main amendments will be presented:

1. The non-tax residency requirement of the individual has been extended from 10 consecutive years to at least 15 consecutive years immediately before the commencement of the individual’s first employment in the Republic of Cyprus. With the latest amendment, there is no limitation as to the first employment in the Republic of Cyprus but this now applies to remuneration from employment in the Republic. This means that the provision of sub-article 23A of Article 8 applies to any subsequent employments within the period of the 17 years;
2. The exemption applies for a period of 17 fiscal years or until the repeal of this subsection, whichever occurs first, beginning with the fiscal year of commencement of the first employment in the Republic;
3. The exemption is granted provided that during the first or second year following the date of commencement of the first employment in the Republic, the remuneration exceeded fifty-five thousand euros (€55,000) per year and the Commissioner is satisfied that the fluctuation in the annual remuneration from employment in the Republic was not designed to abuse the provisions of the specific Article in granting the exemption;
4. The exemption is granted, in the tax year of the commencement of the first employment, provided that the remuneration from employment in the Republic during the first twelve (12) months exceeds fifty-five thousand euros (€55,000);
5. An individual is deemed to have "commenced first employment in the Republic" when, for the first time, after a period of fifteen (15) consecutive tax years during which they did not perform any salaried services in the Republic, they begin to perform salaried services in the Republic either to an employer resident in the Republic or to an employer not resident in the Republic and the term "first employment in the Republic" is interpreted accordingly:

It is further provided that, regardless of the year of commencement of the first employment in the Republic, the provisions of this subsection shall apply from January 1, 2022 and until the completion of a period of seventeen (17) consecutive tax years or until the repeal of this subsection, whichever occurs first, starting from the fiscal year in which the first employment in the Republic of an individual began, who have continuous employment in the Republic from the year of commencement of their first employment until the tax year 2021 and for a period of at least fifteen (15) consecutive years, immediately before starting their employment in the Republic were not residents of the Republic.

1. An individual who was a beneficiary of the 50% exemption in accordance with the provisions of this subsection before the date of publication of the Income Tax (Amendment) Law of 2023, continues to benefit from exemption of fifty percent (50%) of the remuneration from the first employment, provided that the conditions of this subsection are met as they were in force before the date of publication of the Income Tax (Amendment) Law of 2023.
2. The amending law has a retrospective effect as from 01 January 2022.

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 Stephanos Ayiomamitis, Senior Associate, at our Limassol office, Tel +357 25363685 or email stephanos.ayiomamitis@kyprianou.com