The Cyprus 50% Rule, codified under Section 8(23A) of the Income Tax Law, provides a 50% exemption on employment income for individuals who take up employment in Cyprus and whose annual remuneration exceeds €55,000. To qualify, the individual must not have been a Cyprus tax resident in any of the three tax years immediately preceding the year of first employment in Cyprus. The exemption applies for 17 consecutive years from the first year of Cyprus employment.
This exemption is one of the most generous employment income reliefs available in any EU jurisdiction. A senior executive earning €150,000 per year in Cyprus would pay income tax only on €75,000, reducing the effective income tax rate significantly below the headline 35% top rate. When combined with non-domicile status exempting dividend income from SDC, Cyprus becomes highly competitive for attracting C-suite and senior management talent for companies establishing or relocating operations on the island.
The 17-year duration of the exemption was extended as part of Cyprus's broader strategy to compete for international talent and holding-company headquarters. HR and tax professionals managing cross-border relocations should document the individual's prior tax residency history carefully to support the exemption claim on the annual tax return.