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Payroll in Cyprus

Payroll in Cyprus

Employment in Cyprus comes with taxes imposed on both workers and employers. They are computed under the payroll system which can be handled internally through the HR or accounting department or can be externalized.

Below, we have gathered some of the most important aspects of payroll in Cyprus, as well as the services provided by our specialists to local and foreign companies operating here. Our agents are also at your service if you want to open or buy a shelf company in Cyprus.

Legal aspects to consider about the Cypriot payroll system

Several regulations associated with work and insurance apply when it comes to payroll in this insular country. Among them, these are the most important:

  • social insurance;
  • annual paid leave;
  • termination of employment;
  • social pension laws.

 

 Quick Facts  
 Employee/employer registration services (YES/NO)  Yes.

 Payroll setup services (YES/NO)

 Yes, our accountants in Cyprus can handle payroll setup.

Employee records setup and maintenance services (YES/NO) 

Yes, we also offer such a service. 

 Employee remuneration computation

– Salaries,

– bonuses,

– allowances,

– paid annual leave, etc.

 Mandatory contributions for employees

– Social Insurance Fund,

– General Health System (GHS). 

Mandatory contributions for employers 

– Social Insurance Fund,

– General Health System (GHS).

 Payroll reporting requirements

Weekly or monthly. 

 Employee benefits (if any)

– Maternity/paternity leave,

– working our limits,

– overtime payments,

– sickness benefits,

– travel allowances (where applicable).

 Social security contribution for employees

– Social Insurance Fund 8.3%,

– General Health System 2.65%.

 Social security contribution for employers

– Social Insurance Fund 8.3%,

– General Health System 2.9%.

Special regulations for foreign employees (YES/NO) 

No 

 Assistance in drafting labor contracts (YES/NO)

Yes, our specialists can also assist in drafting employment agreements. 

 Specific services for foreign companies (YES/NO) Yes, we are at the service of foreign investors with support in terms of employment and labor-related tax regulations. 
  Assistance in employment regulations (YES/NO)

Yes, we can advise on the Cypriot Labor Code. 

 Tax year in Cyprus  The tax year is the same as the calendar year in Cyprus.

For each of these segments there are specific payroll taxes to pay in Cyprus. These are divided between the employees and their employers.

If you need support related to the management of payroll, you can rely on our accountants. We also have a team of dedicated Cypriot company formation agents who can help you set up a business here.

The main payroll taxes in Cyprus

Social insurance is the main component of payroll in Cyprus and in 2019, the system has undergone a slight increase in the rate applicable to this contribution. Specifically, it increased by 0.5%.

Here is how the contribution applies:

  • self-employed people must contribute a total of 15.6% to the social security system in Cyprus;
  • employees must contribute 8.3% to the fund;
  • employers must contribute 8.3% for social security purposes, 1.2% to the redundancy fund, 0.5% to the Industrial Training Fund, 2% to the Cohesion Fund.

This means that the employer’s social contribution is slightly higher than the employee’s which lessens the burden on the Cypriot workforce.

Our accountants offer tailored solutions related to payroll in Cyprus, should you need support.

 The National Healthcare System in Cyprus

Apart from social security contributions, employers and employees must also pay payroll taxes related to healthcare. This system was introduced by the government in 2019 and its rates are:

  • 2.65% for employees and retired people;
  • 2.90% for employers;
  • 4% for self-employed individuals.

Maintaining an accurate payroll system in a company in Cyprus implies attention and care when it comes to drafting the documents and making the necessary payments associated with each fund. So, if you need support, you can rely on our local accountants.

Registration for social security purposes in Cyprus

To legally hire personnel, an employer must be registered with the Social Insurance Services and have a registration number. Additionally, the company completes a labor agreement or contract with all the employee’s personal information. The employer and employee must both sign the document. The type of the employee’s task, the hours worked, and the method of payment must all be specified in the contract.

This is one of the first stages of setting up the payroll for a company in Cyprus, and our local specialists can help you in this sense.

If you are a new investor and want to start a business faster, the Cypriot shelf company may be a good option for you. Our agents can help you acquire one.

Payroll and the Employment Code in Cyprus

The usual work week in Cyprus is 5 days, and workers are also entitled to 20 days of annual leave, according to the Labor Law. People who work 6 days a week are entitled to 24 days off annually. Moreover, If the worker has worked fewer than 48 weeks in a year, the paid leave may be reduced.

Public holidays, maternity leave, sick days, and time off owing to being unable to work are not included in calculating annual leave.

Unless the hiring company pays the employees directly for their leave, every employer is required to contribute from 6% to 9% of the employee’s wage, depending on the nature of job, to the yearly Leave Fund from which the employees are paid for this type of time off.

Our company formation agents in Cyprus can offer tailored support to business owners who need assistance in payroll matters in respect to the Labor Law.

Here is our infographic on this subject:

The personal income tax in Cyprus

Payroll is based on the taxes a natural person pays on their income obtained from employment. This is one of the most important levies, as both Cypriot citizens, residents, and non-residents can pay at a certain point.

From this point of view, all money earned by residents is subject to taxation. A person must spend more than 183 days in Cyprus in a calendar year in order to be considered a resident. Tax is levied on all income, including pensions, dividends, interest, rents, annuities, royalties, and salaries, that is derived from any trade, business, profession, or vocation. The income of those who are paid a salary also includes benefits in kind. The rates of the personal income tax are progressive, and they range from 0% to 30%, apart from the payroll contributions.

If you need support in setting the payroll system in Cyprus, our accountants can advise and help you with dedicated solutions.

Payroll computation method in Cyprus

Payroll implies the computation, filing and making payments on a monthly basis. The payment amount is determined in accordance with the employment contract and must be completed by the last day of the current month.

Payroll in Cyprus is strongly related to employment regulations, which means that when dealing with it, companies must also take into account the Labor Code’s provisions related to working hours, annual leave and other special conditions.

Should you need support with payroll, you can rely on us.

Payroll options for companies in Cyprus

Owning and running a business in Cyprus in not difficult. However, there are many aspects to take care of when also having employees, and payroll is one of the most important as one must respect fiscal and employment regulations. This is why, many enterprises usually choose between:

  • setting up an in-house HR and payroll department;
  • delegating the task to the accounting department;
  • using outsourced payroll services.

If you need support in choosing an appropriate solution, you can discuss your options with our Cypriot accountants. We are at your disposal with outsourcing payroll services that will help you save both time and money.

We are a multi-disciplinary team, and we can also help you in other matters, such as setting up a new entity or buying a shelf company in Cyprus.

Our payroll services in Cyprus

Here are the main payroll services you can rely on our accountants in Cyprus for:

  • drafting payroll monthly documentation for each employee;
  • automated payslip generation solutions;
  • making mandatory payments to all social security contribution funds;
  • making salary payments directly to employees’ accounts at the established date.

Here is also our video on this subject:

Apart from these, you can also count on us for HR services, in accordance with the regulations imposed by the Ministry of Labor.

If you need more information or support in setting up the payroll system in Cyprus, contact us. We are also at your service if you want to acquire a shelf company in Cyprus.