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Employing in Cyprus

At a glance

Employment in Cyprus

Cypriot employment law is relatively straightforward and flexible. There are minimal statutory requirements with regards to contracts, termination procedures as well as employee pensions and holidays. On the whole, the Cypriot labour market is much more flexible than most of its European counterparts. As the following only aim to act as a guide in the broadest sense, it is still recommended that professional legal advice be sought when employing in Cyprus. For further reading, please refer to the Cypriot Ministry of Labour’s website here.

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Payroll & Tax in Cyprus

Foreign companies operating in Cyprus may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Cyprus are: Individual income tax (IIT) for employees in Cyprus, social security costs, VAT, withholding tax, business tax and permanent establishment concerns. Many companies will consider outsourcing these administrative tasks to a GEO (Global Employment Organization).

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Immigration / Work Permits in Cyprus

Employment of foreign nationals in Cyprus is largely governed by the availability of equivalently qualified Cypriot or EU/EEA personnel to fill the vacancy. However, the Cypriot government has exempted executive directors, middle-management staff and other key supporting staff working for international business companies from this requirement.

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Incorporation

There are three types of business forms available to foreign companies in Cyprus. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Cyprus and the planned business activity.

When setting up a company in Cyprus, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Cyprus for business purposes. In particular, it looks at common pathways to establishing a business presence in Cyprus, generally through a corporation, branch or representative office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Cypriot economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, August 2015 or closest available dates.

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GEO Solutions or DIY Employment in Cyprus?

GEO Solutions or DIY Employment

Companies entering Cyprus must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Cyprus Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Cypriot entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Cyprus

Payroll Cyprus
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
0-€19,500 0
€19,500-28000 20
€28001-36300 25
€36301-60000 30
Over €60000 35
Tax Returns Supplied

N/A

Corporate Tax Requirements

Companies are required to submit their tax returns by 31 March of the year following the tax year via electronic submission, which is mandatory for companies. The tax year is usually the calendar year.

Companies must make two provisional payments of tax on 31 July and 31 December. If the income declared for the payment of the provisional tax is lower than 75% of the income as finally determined, an additional amount equal to 10% of the difference between the final and provisional tax is payable.

Employers Social Security and statutory contributions

Employer’s total contributions include:

  • Social Insurances’ contributions amounting to 7.8% of the employee’s monthly salary.
  • Contributions to the Social Cohesion Fund equal to 2% of the employee’s monthly salary.
  • Contributions to the Redundancy Fund equal to 1.2% of the employee’s monthly salary.
  • Contributions to the Industrial Training Fund equal to 0.5% of the employee’s monthly salary.
  • Contributions to the Leave Fund (in lieu of holiday pay) equal to 8% of monthly salary [however, exemption may be obtained from having to contribute to this fund]

All monthly contributions are capped at € 4,533.

In addition to the above, both employers and employees are also subject to a special contribution for any individual with monthly gross employment income above €1,500. The rates range from 0-3%, and are shared equally between the employer and the employee.

Employees Social Security and statutory contributions

Employees only make contributions towards Cypriot Social Insurance. The employee’s total contributions amount to 7.8% of their monthly salary. All monthly contributions are capped at € 4,533.

In addition to the above, both employers and employees are also subject to a special contribution for any individual with monthly gross employment income above €1,500. The rates range from 0-3%, and are shared equally between the employer and the employee.

Insurance requirements

Shield GEO does not provide sponsored work permits in Cyprus at this moment.

Corporate Income Tax Rate

The current corporate tax rate in Cyprus is 12.5%.

Payroll Tax

No

Sales Tax

VAT is imposed on the supply of goods and provision services in Cyprus, as well as on the acquisition of goods from the European Union (EU) and the importation of goods into Cyprus. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods or services which they receive (input tax).

The registration threshold for VAT purposes is € 15,600 (€ 10,251 for intra-community acquisitions of goods.

The current standard rate of VAT imposed on taxable goods and services is 19%, with reduced rates of 0%, 5% and 9%.

Withholding Tax

Cyprus imposes withholding tax (WHT) on certain classes of income earned by non-residents:-

  • Dividends: No WHT applies. However, a 17% Defence Fund tax is withheld from dividends paid to resident individuals. This tax is a final tax.
  • Royalties: 5% on film royalties, and 10% on all other royalties
  • Interest: No withholding tax is imposed on interest paid to a nonresident. Interest paid to a resident is subject to Defense Fund Tax deducted at source at 30%.
  • Technical service fee: 10%
 A reduced rate may be available under an applicable Double Tax Treaty or EU Directive.
Other Tax
  • Immoveable property tax: Immovable property tax (IPT) is imposed on immovable property located in Cyprus and held by individuals and legal entities at 1 January each year. The tax base is the value of the property as at 1 January 1980, as determined by legislation. The rates range from 0.6% to 1.9%.
  • Stamp duty: Imposed on certain instruments relating to a property situated in Cyprus or to an act to be performed in Cyprus. Stamp duty on commercial contracts is charged at rates that vary according to the contract amount. A ceiling of € 20,000 per document applies.
  • Transfer taxes: The transfer of immovable property is subject to a transfer fee ranging from 3% to 8%, calculated on the market value of the property as estimated by the land registry department.
  • Special contributions for defence taxes: Defence Fund taxes are imposed on income derived by companies and individuals resident in Cyprus from sources in Cyprus. The Defence Fund tax is levied on dividends (17%) [in some cases], interest (30%) and rents (3%). A basic levy of 0.15% (paid in four instalments of 0.0375%) of specified liabilities is payable by all credit institutions incorporated in Cyprus and by their foreign branches. An annual company levy of € 350 is imposed on companies, capped at a total of € 20,000 for companies in a group. The levy is payable by 30 June of each year, with penalties applying for late payment.
Work Permits
Can Sponsor Work

No

Work Permit cost

Shield GEO does not provide sponsored work permits in Cyprus at this moment.

Work Permit processing time

Shield GEO does not provide sponsored work permits in Cyprus at this moment.

Work Permit process

Shield GEO does not provide sponsored work permits in Cyprus at this moment.

Business Visas
Can do Business Visa

N/A

Business Visa Cost

Shield GEO does not provide business visas in Cyprus at this moment.

Business Visa processing time

Shield GEO does not provide business visas in Cyprus at this moment.

Others
Can supply private health care

N/A

Can assist opening bank accounts

N/A

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