Income tax exemption for repatriation to Cyprus

On 6 March 2026, the long-anticipated tax exemption, as part of the “Minds in Cyprus” initiative, was published in the Official Gazette of the Republic of Cyprus. The relevant initiative was approved by the Council of Ministers back in 2025, based on a dedicated action plan, designed to encourage talented professionals from abroad to return to Cyprus and contribute to the country’s economic development¹. More specifically, the objective of this initiative is to leverage the global expertise and skills of Cypriots residing and working abroad, by offering a tax incentive, alongside other support measures, to facilitate their re-integration into both Cypriot society and the local workforce.

From a tax perspective, as part of this initiative, a new exemption has been introduced to the Income Tax Law, under Article 8(21B). This exemption complements the existing framework of incentives available to individuals relocating to Cyprus to take up first employment, under Articles 8(21A) and 8(23A) of the legislation. For further details regarding the existing incentives for first employment in Cyprus, please refer to our alert here.

Importantly, the newly introduced exemption under Article 8(21B) applies retrospectively from 1 January 2025.

Under the new provisions of the Income Tax Law, this exemption is available to both employees and self-employed individuals, who commenced their professional activities in Cyprus after 1 January 2025, provided that their annual employment income or business profits exceed the threshold of EUR30.000 per annum, for the duration of utilizing the incentive.

Eligible individuals are granted an exemption from taxation of 25% of their gross annual employment income or annual business profits, capped at a maximum of EUR25.000 per annum.

This exemption applies for a 7-year period, commencing from the year the individual takes up employment or a business activity in Cyprus.

Moreover, to qualify for the exemption, an individual must cumulatively meet the following conditions:

1. The individual is a Cyprus tax resident²;
2. The individual has not been a Cyprus tax resident for at least 7 consecutive years prior to the commencement of the employment or self-employment in Cyprus;
3. The individual had been a Cyprus tax resident at some point before the required 7-year period of non-Cyprus tax residency (as per point 2 above);
4. The individual had been employed full-time outside of Cyprus, by a non-Cyprus tax resident employer, for either:
   

(i)  at least 36 months (3 years) within a period of 84 months (7 years), preceding the month of commencement of the professional activities in Cyprus. This threshold applies only to individuals holding a university degree; or

(ii)  84 months (7 years), preceding the month of commencement of the professional activities in Cyprus, in all other cases (e.g. individuals not holding a university degree).

¹ Minds in Cyprus

² An exception applies for the year of commencement of the employment or self-employment in Cyprus, during which the individual may be either a Cyprus tax resident or a non-Cyprus tax resident.

The introduction of the new exemption under Article 8(21B) is a very positive development. This initiative is strategically designed to complement the existing tax framework available to individuals who relocate to Cyprus to take up first-time employment, as well as to individuals who were previously Cyprus tax residents, who developed or progressed their professional careers abroad and now wish to repatriate to Cyprus.

Furthermore, the new exemption introduces a notable enhancement in relation to the eligible activities that can be undertaken in Cyprus in order to benefit from this incentive. More specifically, as per the provisions of Article 8(21B), both employment and self-employment activities can qualify for this incentive, in contrast with the other existing similar incentives under Articles 8(21A) and 8(23A), which are available only to employees. This development enables a broad range of professional arrangements to benefit from this regime, in line with the specific business circumstances of each individual.

Moreover, as this exemption can apply to eligible individuals earning just over EUR30.000 per annum, it can be argued that this incentive is available to almost all eligible individuals, across all income levels and not only to high earners, thereby ensuring its applicability to a wide spectrum of qualifying taxpayers.

With the benefits of this exemption in mind and taking into account the recent increase in the tax-free threshold to EUR22.000, as well as the adjusted income tax bands applicable to individuals, an attractive personal tax regime is now in place for individuals who wish to repatriate to Cyprus to continue their professional careers, in a tax efficient manner. 

If any assistance or further clarification is required regarding this matter, please do not hesitate to contact our office.