Key Provisions of the New Article 8(21B) of the Income Tax Law
On 6 March 2026, the amending Income Tax Law 17(I)/2026 was published in the Official Gazette of the Republic of Cyprus, introducing a new exemption under Article 8(21B) of the Income Tax Law.
The amendment provides a tax exemption of 25% (capped at €25,000 per annum) on the remuneration derived from employment exercised in Cyprus or on the profits of an individual carrying on a business in Cyprus, provided that the individual satisfies all of the following conditions.
Eligibility Conditions
The exemption applies to an individual who meets all the following criteria:
- Except for the year in which the individual commences employment or begins carrying on a business in the Republic, the individual must be a tax resident of the Republic of Cyprus.
- The individual must have commenced employment or business activity in Cyprus between 1 January 2025 and 31 December 2030.
- During the first twelve (12) months following the commencement of employment or business activity, the individual must have employment income or business profits exceeding €30,000.
- The individual must not have been a tax resident of the Republic during the seven (7) tax years immediately preceding the year in which employment or business activity commenced.
- The individual must have been a tax resident of the Republic in at least one tax year prior to the seven-year period referred to above.
In addition, the individual must satisfy at least one of the following conditions
A. University Degree and Employment Abroad
- The individual must hold a recognized university degree, as acknowledged by the Cyprus Council for the Recognition of Higher Education Qualifications.
- The individual must have been employed outside the Republic on a full-time basis for at least thirty-six (36) months within the eighty-four (84) months preceding the month in which employment or business activity in Cyprus commenced.
B. Long-Term Employment Abroad
- Alternatively, the individual must have been employed outside the Republic on a full-time basis for a continuous period of eighty-four (84) months preceding the month in which employment or business activity in Cyprus commenced.
Duration of the Exemption
The tax exemption applies:
- for the tax year in which the employment or business activity commences, and
- for the six (6) immediately following tax years.
Accordingly, the exemption may apply for a maximum period of seven (7) consecutive tax years.
For the exemption to continue to apply, the individual’s annual employment income or business profits must exceed €30,000 in each relevant tax year.
Restrictions
- Where the exemption under Article 8(21B) is granted, the individual cannot simultaneously benefit from the exemption provided under Article 8(21A) of the Income Tax Law.
- The exemption may be granted only once during the lifetime of the individual.
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Authors: Alexandros Christodoulides