On the 19th of December 2019, the amendment of Article 14 of the Income Tax Law of 2002 to 2019 was announced in the Official Gazette of the Republic of Cyprus. As per the amendment the limit of personal allowances for individuals will be increased from 1/6 to 1/5 of their Net income.
Net income is the Gross total income less deductions and exemptions. The Deductions are donations to approved charities, trade unions and professional subscriptions, capital allowances on rented properties, 20% of rental income, interest paid on loan to purchase the rented property, expenditure incurred for the purpose of maintaining a preserved building.
The exemptions among others are the dividend income, interest income, 20% of the remuneration from any office or employment exercised in the republic by an individual who was resident outside the Republic before the commencement of his employment or €8.550 whichever is the lower( applicable until the year 2020), 50% of the employment income from any employment exercised in Cyprus by an individual who was resident outside the Republic before the commencement of his employment in Cyprus provided that the income from employment exceeds the €100.000 pa ( applicable for a period of 5 years).
Personal allowances are contributions made to the Social Insurance Fund, Provident and Pension Fund, General Health System, Life Insurance premiums (restricted to 7% on the insured amount) and private medical plans.
Mr Christos has the below income for the year 2019:
The deductions and personal allowances are the following:
Income Tax Computation
Tax payable under the new law of 1/5 restriction (from the year 2019)
Tax payable under the previous law of 1/6 restriction (up to the year 2018)
Due to the increase of personal allowances limit from 1/6 to 1/5 Mr Christos has a tax saving of €345