What is the Cyprus 20% exemption?

Section 8(21A) exempts 20% of pay from first employment in Cyprus, or EUR 8,550, whichever is lower, for seven tax years starting from the year after the employment begins.

Someone who was employed outside Cyprus by a non-Cyprus employer for three consecutive years before, whose first Cyprus employment starts up to and including 2027. There is no salary floor.

Can I combine it with the 50% exemption?

No. The 50% exemption cannot be combined with paragraphs 21, 21A, 21B or 23, so you take one or the other.

Cyprus 20 percent employment exemption: the smaller one, and its deadline

The exemption for people whose salary is too small for the 50% one, with a closing date.

Last verified 2026-10-22Next review 2027-01-222 official sources

Whether Cyprus works for you depends on how you earnTalk it through

Cyprus 20 percent employment exemption, an empty desk in a small shared office

Cyprus 20 percent employment exemption is the smaller sibling of the 50% one, and it exists for people whose Cyprus salary is nowhere near EUR 55,000. It gives 20% of your pay or EUR 8,550, whichever is lower, for seven tax years.

Cyprus 20 percent employment exemption: what it gives

Twenty per cent of pay from your first employment in Cyprus, capped at EUR 8,550 a year. The cap bites at a salary of EUR 42,750; above that the exemption is a flat EUR 8,550 however much you earn.

It runs for seven tax years, starting from the year after the employment begins, not from the first year. That is a small detail with a real consequence: the year you arrive gets nothing.

Who qualifies

You were employed outside Cyprus by a non-Cyprus employer for three consecutive years before starting.
Your first employment in Cyprus starts up to and including 2027.
There is no minimum salary, which is the main way it differs from the 50% exemption.

The 2027 door

The window for a first employment to begin runs to the end of 2027. The seven years then run from there, so someone starting in 2027 has it until 2035. Someone starting in 2028 does not have it at all unless the law is extended.

If you are deciding between moving this year and in two years, that is one of the few genuinely time-limited reasons to move sooner.

You take one or the other

The 50% exemption on pay above EUR 55,000 cannot be combined with this one. The comparison is straightforward: at EUR 100,000 the 50% exemption takes EUR 50,000 out of tax and this one takes EUR 8,550. At EUR 40,000 the 50% exemption is unavailable, because it needs pay above EUR 55,000, and this one gives EUR 8,000.

There is also a newer 25% exemption, capped at EUR 25,000, which covers self-employed business profit as well as salary. That one is aimed at people who were Cyprus resident at some earlier time and are returning after at least seven years away, and it cannot be combined with this exemption either.

Why a founder might not care

All three exemptions are about employment pay. If you own the company and draw dividends, the income tax on them is already nil and no exemption adds anything. These matter when you have a reason to pay yourself a salary, which is usually social insurance, a mortgage application, or the 60-day rule's Cyprus employment condition.

The text is in section 8(21A) of the consolidated Income Tax Law.

Common questions

What is the Cyprus 20% exemption?: Section 8(21A) exempts 20% of pay from first employment in Cyprus, or EUR 8,550, whichever is lower, for seven tax years starting from the year after the employment begins.
Who qualifies?: Someone who was employed outside Cyprus by a non-Cyprus employer for three consecutive years before, whose first Cyprus employment starts up to and including 2027. There is no salary floor.
Can I combine it with the 50% exemption?: No. The 50% exemption cannot be combined with paragraphs 21, 21A, 21B or 23, so you take one or the other.

Whether Cyprus works for you depends on how you earn

Where you live is only half of it. We can walk through your position with you, including the cases where Cyprus tax residency does not give the result people expect. This is general information, not tax advice for your circumstances.

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Sources

Every legal, fee and procedural statement on this page is taken from the sources below and was checked on 2026-10-22. Where they change, this page changes.

Income Tax Law 118(I)/2002, consolidated text (cylaw.org) — Tax residency (section 2), dividend exemption (section 8(20)), IP Box (section 9(1)(κ)) and rates
Law 244(I)/2025 amending the Income Tax Law, Official Gazette No. 5070 of 31 December 2025 (cylaw.org) — 15% corporate tax, the 2026 60-day rule, personal tax bands and the 8% crypto rate, from 1 January 2026

This page is general information about Cyprus rules as published by the authorities named above. It is not legal or tax advice for your circumstances, and immigration outcomes depend on your nationality, documents and individual case. See our legal and tax information disclaimer.