Located on the eastern Mediterranean, the island of Cyprus (officially the Republic of Cyprus) is known for its rich, tumultuous history and majestic beaches. Thought to be the birthplace of the ancient Greek goddess of love, Aphrodite, the earliest known human activity on the island dates back to around the 10th millennium BC. Cyprus is de facto partitioned into two main parts: the area under the effective control of the Republic, located in the south and west, and comprising about 2/3 of the island’s area; and the north, administered by the self-declared Turkish Republic of Northern Cyprus, covering about 1/3 of the island’s area. United Nations troops patrol the “Green Line” dividing the two parts.
With a population of over 1 million, Cyprus has successfully diversified its mainly agrarian economy into one based on services, especially the tourism sector. In 2004 Cyprus joined the EU but did so as a divided island.
Contributions to Social Insurance are compulsory in Cyprus and cover everyone employed in the Republic. The Employer and Employee both contribute 7.8%.
Residents are subject to tax on their worldwide income including benefit in kind. Cyprus has a progressive tax system. The personal income tax rates applicable are as follows:
|Taxable Income EUR||Tax Rate %|
|0 – 19,500||0%|
|19,501 – 28,000||20%|
|28,001 – 36,300||25%|
|36,301 – 60,000||30%|
|60,001 and over||35%|
In the time period between January 2014 and December 2016, a Special Tax Contribution was also levied but was abolished as of January 1 2017.
The employer must be legally registered with the Social Insurance Authorities and have a registration number in order to be able to employ in Cyprus. Furthermore, a hiring document/contract must be completed by the employer containing full personal details of the employee. The document has to be signed by both employer and employee.
Employees that work five days per week have the right of 20 days annual leave. Employees that work six days per week are entitled to 24 days per year.
Every Employer is liable to pay a contribution (6-9% of the employee’s salary depending on the type of work) to the Annual Leave Fund from which the employees are paid for their annual leave unless the employer pays the employees directly for their leave.
In case of illness, the employee must visit a doctor who will decide how many days the employee will need to be on sick leave. The salary and insurance for this leave are covered exclusively by the Social Insurance Fund. The first three days of the sick-leave are unpaid. In order to receive this salary, the employee has to complete a request form and submit it to the Social Insurance Authorities.
Maternity Allowance is provided for 18 consecutive weeks (can start two-six weeks prior to the estimated birth date). The salary and insurance contributions of the new mother are usually paid by the Social Insurance Fund and are equal to 75% of the salary (if the mother is the head of the family the allowance is 80%, or 90% if the mother has more than one dependent).
The employer is not allowed to dismiss the new mother for at least one year after she has given birth.
Furthermore, after the mother goes back to work, she is entitled to a shift reduction of one hour per day for the first nine months after the date of birth.
In case of delivery of a second child, the duration of maternity leave extends for 4 more weeks. In case of delivery of more than two children, the duration leave extends for another 4 weeks.
If the employer decides to terminate an employee, the employer is obligated to give notice period depending on the length of service ranging from 1 week to 8 weeks.
A termination of employment document needs to be signed by both parties.
The employer needs to pay the employee for the end of service, as well as to provide the employee with the benefits he/she is entitled to for the period worked (such as 13th salary) and all days of leave due to the employee.
If the duration of the agreement is a defined one and that time period concludes, the employee is obliged to leave without any additional compensation after getting paid for the period of service. The agreement may automatically continue for an indefinite time of employment if both parties are in agreement.
The above is merely scratching the surface of Cyprus payroll processes. We want to thank the team at Eurofast for their contributions to this post. Celergo is ready and happy to assist you with your payroll needs in Cyprus, feel free to contact us if you have any questions!
**This article is for informational purposes only. It is not intended to constitute legal advice.