Running Payroll in Cyprus

Cyprus is not only a well-known tourist destination but also a strategic business hub that attracts international companies and foreign investors seeking access to both European and Middle Eastern markets. The island offers a business-friendly environment, characterized by a competitive corporate tax rate, EU membership, a robust legal framework, and an educated, English-speaking workforce.

For foreign companies planning to hire employees in Cyprus—whether through a local entity or cross-border employment—it is essential to understand and comply with the country’s employment and payroll regulations. This includes adhering to rules on social insurance contributions, income tax withholding, labor law provisions, and reporting obligations.

The first steps for employers who need to process payroll for their employees in Cyprus are to register with the Tax Department and the Social Insurance Services. Upon completion of the registration process, the authorities issue a Tax Identification Number (TIN) and an Employer Social Insurance Number. These are essential for payroll reporting and processing.

New hires must be declared to both authorities prior to the commencement of employment. If employees are not yet registered with the local authorities, employers are required to submit the necessary documentation to register them within seven calendar days from the commencement of employment.

All employed individuals in Cyprus are mandatorily covered by the national social insurance system, which encompasses various benefits such as pensions, sickness, unemployment, and maternity allowances. The system is funded through contributions from employees and employers. The income tax system is progressive.

Tax Considerations

Personal income tax in Cyprus is progressive, with tax rates ranging from 20% to 35%. Annual income up to EUR 19,500 is exempt from income tax. Benefits provided to employees are generally subject to income tax, including benefits in kind. Tax residents are subject to personal income tax on their worldwide income, whereas non-tax residents are taxed only on income sourced in Cyprus.

There is a 50% income tax exemption for individuals taking up employment in Cyprus, provided their annual remuneration exceeds EUR 55,000. This exemption applies for a period of 17 years starting from the year of commencement of employment in Cyprus. Conditions apply, including that the individual was not a tax resident of Cyprus for at least 15 years prior to commencing employment.

For lower annual income levels, a 20% exemption—or up to EUR 8,550 per year, whichever is lower—is available for individuals who were not tax residents of Cyprus before the start of their employment. This exemption applies for a maximum of 7 years, and is granted for tax years up to and including 2027, provided the employment began after 26 July 2022.

Additionally, Cypriot tax law provides an exemption for income earned from employment exercised outside Cyprus for more than 90 days in total in a tax year, provided the remuneration is paid by a non-Cyprus resident employer or a foreign permanent establishment of a Cyprus resident employer.

Tax Withholding and Reporting 

Employers have to withhold their employees’ personal income tax through the PAYE (Pay As You Earn) system and report and submit the withheld amounts to the Tax Department by the end of the following month, using the TD61 tax form.

Employers are required to submit the TD7 form annually, typically by the end of March, detailing the total emoluments paid and taxes withheld for each employee during the previous tax year. They are further obligated to provide employees with the TD63 form, an emoluments certificate detailing income earned, taxes paid, and contributions to social insurance and healthcare. Employees must file their personal income tax returns using the TD1 form by 31 July of the year following the tax year in question.

The tax year in Cyprus runs from 1 January to 31 December. 

Social Security Contributions

Employees in Cyprus are automatically covered by the country’s social insurance scheme. There are two main funds to which employees and employers make monthly contributions:

• Social Insurance Fund

• General Health System (GHS)

As of 2025, the contribution to the Social Insurance Fund is set at 17.6% and is split between employee and employer in equal parts (8.8% each), based on insurable earnings up to a monthly ceiling of EUR 5,551. Contributions to the General Health System amount to 2.65% for employees and 2.90% for employers, calculated on total earnings without a cap.

In addition to these two main social security funds, employers also have to make a monthly contribution to three other funds supporting industrial training, redundancy, and social cohesion.

Employers are responsible for withholding their employees’ share as well as for making their own contributions. The deadline for payments to the social security authority is the end of the month following the pay period. Since January 2021, it is mandatory to issue social security payments via the official online portal SISnet.

Unless employers opt to provide their employees with more paid days off than the statutory requirement and wish to handle holiday pay directly, they are obliged to contribute to the Central Holiday Fund, which covers employees' statutory annual leave entitlements. Contributions amount to 8% of the employee’s annual earnings.

Employees in Cyprus are entitled to various benefits. These include:

• Annual leave and public holidays: 20 days of paid annual leave per year for employees with a 5-day working week (24 days for employees with a 6-day working week); plus 14 public holidays

• Maternity leave: 12 weeks for the first and second child and 26 weeks for the third (and any subsequent) child

• Paternity leave: two consecutive weeks of paternity leave which must be taken within the first 16 weeks after birth

• Parental leave: 18 weeks of unpaid leave until the child turns 8

• Sick leave: sickness benefits are paid by Social Security starting from the 4th day of sick leave

For more information on employee benefits and other employment requirements in Cyprus (including severance pay and termination procedures), check out our Global Hiring Guide.

Cyprus has implemented a national minimum wage applicable to most sectors. In 2025, the minimum wage is set at EUR 1,000 per month for full-time employees. This rate is subject to periodic reviews based on economic conditions. Certain sectors, such as agriculture and domestic work, are exempt from this general minimum wage.

While Cyprus does not have a universal legal framework mandating overtime pay rates across all sectors, collective agreements and individual employment contracts often stipulate overtime compensation. There is no legal obligation for employers in Cyprus to provide annual bonuses. However, it is a common practice for employers to offer a 13th salary or end-of-year bonus, typically paid in December.

Cypriot labor law does not mandate a specific payroll frequency. Employers have the flexibility to choose a payment schedule that suits their operations. Common practices include weekly, bi-weekly, or monthly payments, with monthly payments being the most prevalent.

Employers are required to provide employees with a payslip for each pay period. These can be delivered in either digital or hard copy form. The payslip must detail the gross wage, any deductions, and the net wage. Payroll records should be kept for at least six years, aligning with general accounting requirements.