As we have reported in the past, one of the incentives for attracting people to work in Cyprus, has been the so called 20% exemption, which is actually the first such incentive introduced. It has been mainly targeting expatriates and Cypriots studying abroad to return to Cyprus for employment.
Part of an initiative introduced recently by the Cyprus government known as “Minds in Cyprus – The Brain Gain Initiative”, aiming to repatriate talent to Cyprus, is an amendment to the Income Tax Law, which was published in the Official Gazette of the Republic on 6 March 2026. Through this amending law enhanced tax incentives are introduced, designed to encourage talented Cypriot individuals who are abroad to return to the country and contribute to its growth. The provisions of the amending law have entered in to force retrospectively from 1 January 2025 and will remain active for employment or business activity starting up by the end of the 2030 tax year. The incentives apply to both employees and self-employed individuals.
A tax exemption of 25%, capped at €25.000 per annum, is provided on the remuneration received from employment in Cyprus, or on the profits of an individual carrying on a business in Cyprus. All of the following conditions need to be satisfied for the exemption to be granted:
- Except for the year in which he/she begins to be employed or to carry on a business in Cyprus, the individual is a tax resident of the Republic; and
- The individual began to be employed or to carry on a business in the country from 1 January 2025 up to and including the year 2030; and
- During the first twelve months following the commencement of employment or business activity in Cyprus, the individual had employment income or business profits exceeding €30.000; and
- The individual was not a tax resident of the Republic during the seven tax years immediately preceding the year in which employment or business activity commenced in the country; and
- He/she must have been a tax resident of Cyprus in at least one tax year prior to the 7 year period.
Furthermore, at least one of the following conditions must be satisfied:
- The individual holds a recognized university degree, as recognized by the Cyprus Council of Recognition of Higher Education Qualifications, and was employed on a full-time basis outside the Republic by a non-Cyprus tax resident employer for at least 36 months within the 84 months preceding the month of commencement of employment or business activity in Cyprus.
- The individual was employed on a full-time basis abroad by a non-Cyprus tax resident employer for a continuous period of 84 months preceding the month of commencement of Cyprus employment or business activity if that individual does not hold a recognized university degree.
The exemption is granted for the year in which employment or business activity begins and for the following six tax years, provided that the remuneration of an individuals from employment or profits from business activity in Cyprus exceeds €30,000 in each tax year.
The 20% exemption remains in force, but it can not be claimed if the exemption described before is granted.
The exemption may be granted only once in an individual’s lifetime.
