Resident in Cyprus
An individual is tax resident in Cyprus if he/she is physically present in Cyprus for an aggregate period exceeding 183 days in the tax year. Tax resident individuals are liable to tax in Cyprus on their worldwide income whereas non-resident individuals are only liable to tax on income accruing or arising in Cyprus.

Tax rates
The tax rates that apply to individuals for the tax year 2008 are as follows:

YEAR 2008
Taxable Income			Tax rate	Amount of tax	Cumulative tax
€		€	%	€	€
0	-	19.500	0	0	0
19.501	-	28.000	20	1.700	1.700
28.001	-	36.300	25	2.075	3.775
36.301 and above			30

Exempt income
The main exemptions are as follows:

• Dividends received are exempt from income tax (see also for Special Contributions for Defence Law provisions).
• Profits of a permanent establishment situated outside Cyprus of a Cypriot resident are exempt from tax. This exemption does not apply if the permanent establishment engages more than 50% in activities, which lead to investment income, and the foreign tax burden on the income of the permanent establishment is substantially lower than the tax burden of the Cypriot resident in the Republic.
• The profit from the disposal of securities is exempt from tax irrespective of whether it is of capital or trading nature. Securities include shares, government stocks, debentures, bonds, founder’s shares and rights thereof.
• The whole of interest income. Interest income, which is received in the ordinary course of a business, including interest closely connected to the ordinary course of business, is not exempt but is included in the taxable income of the business (see also, special contribution for defence law provisions in relevant section above).
• The lower of 20% of the remuneration from an employment, which is exercised in the Republic by a person who was a non-resident before the commencement of his employment, and €8.543. This exemption applies for a period of three years from 1 January of the year following the year in which the employment commenced.
• The emoluments from salaried services performed abroad for an aggregate period in the tax year exceeding 90 days, for a non resident employer.

Deductions
The following are deducted from income:

• Interest relating to the acquisition of fixed assets used in the business.
• Expenses for letting of buildings provided the exceed 20% of the rental income.
• Interest in respect to the acquisition of a building for rental purposes.
• Subscriptions to trade unions or professional bodies.
• Expenditure for the maintenance of buildings under preservation order up to €342, €313 or €598 per sq. m. (depending on the size of the building).
• Donations to approved charitable organisation (with receipts).

Non-deductible expenses
The following expenses are not tax deductible:

• Business entertainment expenses including hospitality expenses of any kind which are incurred for the purpose of the business of any amount in excess of 1% of the gross income or €17.086 (whichever is the lower).
• Private motor vehicle expenses.
• Professional tax.
• Interest payable in relation to the acquisition of a private motor vehicle, irrespective of whether it is used in the business or not, or other asset not used in the business. This restriction is lifted after 7 years of purchase of the private motor vehicle or other asset not used in the business.
  

Losses
Carry forward of losses
Losses are carried forward indefinitely. Losses for the years 1997 onwards, which have not been offset against profits arising up to the year 2002, will be carried forward to 2003 and subsequent years without time restriction.

Where a person, including a partnership, converts his business into a limited liability company, any unrelieved losses can be transferred to the new company.

Loss of a permanent establishment outside the Republic
Losses arising from a permanent establishment maintained outside the Republic can be offset against profits arising in the Republic. However, when a profit arises from such a permanent establishment, an amount equal to the losses that have been utilised in the past against profits arising in the Republic will be included in the taxable income.

Personal Allowances
The following are deductible from income:

Social insurance contributions, contributions to approved provident and pension funds, contributions to medical or other approved funds as well as insurance premiums in respect of the life of the claimant

The whole amount up to 1/6 of the taxable income before this allowance

• The annual life insurance premium is restricted to 7% of the insured amount
• Life insurance policies, in respect to the life of the claimant’s spouse, which were in existence up to the 31 December 2002 and for which the claimant was receiving a tax allowance, will continue to be deductible by the claimant.
• In the event of cancellation of a life insurance contract within 6 years from the date it was entered into, part of the life insurance premiums already given as a allowance will be taxable as follows:

- cancellation within 3 years 30%
- cancellation between 4 to 6 years 20%