Compulsory Payments Related to Employees
Working in Cyprus:
Cyprus payroll regulations require employers to pay Social Insurance Contributions for their employees
and employees to pay both Social Insurance and Payroll Taxes on their gross earnings.
A) Social Insurance Contributions:
The employer is liable to pay contribution to the Funds (Social Insurance, Annual Holiday’s with Pay, Redundancy, Human Resource Development and Social Cohesion) for each of his employees, whose remuneration is not less than €2 per week, or not less than €7 per month, if he/she is a salaried employee.
The liability of the employer for paying contributions to the Social Insurance Fund ceases on the day the employee reaches the pensionable age, i.e. the age of 65. In the case the employee reaches the pensionable age and does not satisfy the contribution conditions for old age pension, the employer is obliged to continue to pay contributions until the employee is entitled to old age pension. Under no circumstances contributions are payable after the age of 68. The employer is obliged to pay contributions to the Central Holiday Fund, the Redundancy Fund, the Human Resource Development Fund and the Social Cohesion Fund even if the employee receives old age pension and irrespective of his age.
The employer is not obliged to pay contributions to the Central Holiday Fund if he obtains the relevant exemption. The exemption for the payment of contributions to the Central Holiday Fund is given by the Minister of Labour and Social Insurance, after the employer has filed an application. The exemption is granted with the completion of the “Application of the Employer for Exemption from the Obligation
of Payment of Contributions”. Exemption is granted in the cases where the employer provides annual holidays to his employees on more favourable terms than those provided under the Annual Holidays with Pay legislation.
The earnings taken into consideration for the purpose of payment of contributions to the Social Insurance, Annual Holidays with Pay, Redundancy and Human Resource Development Funds are up to a maximum amount which is fixed every year. The maximum amount for 2015 is €1.046 per week or €4.533 per month. For the Social Cohesion Fund the total earnings are taken into consideration without a maximum amount.
Breakdown for Social Insurance Contributions:
(a) Social Insurance Fund
– Rate 15,6%: 7,8% is payable by the employer and 7,8% by the employee. In case an employer implements an occupational pension scheme without payment of contributions on the part of the employees, then the employer pays 10,15% and the employee 3,45%.
– The employer is responsible for the payment of his and his employee’s contributions. He is entitled, however, to deduct the amount of contributions he pays on behalf of his employee from the earnings of the employee for the period for which he pays contributions.
(b) Central Holiday Fund
– The rate of contribution to the Central Holiday Fund varies according to the length of annual leave, to
which the employed person is entitled.
– The contribution to the Central Holiday Fund is payable wholly by the employer.
(c) Redundancy Fund
– Rate 1,2%. The contribution to the Redundancy Fund is payable wholly by the employer.
(d) Human Resource Development Fund
– Rate 0,5%. The contribution to the Human Resource Development Fund is payable wholly by the employer
(e) Social Cohesion Fund
– As from 1.1.2003 Rate 2%. The contribution to the Social Cohesion Fund is payable wholly by the employer.
B) Payroll Taxes:
a) Payroll Taxes
Are paid wholly by the employees and the amount of taxes to be paid is calculated according to the
below table. Payroll Taxes are calculated on actual gross salary received and any other benefits in
kind received by the employee.
Cyprus Individual income tax rates 2015
b) Temporary Contribution
As of 1 January 2014 and for a period of two years (up to 31 December 2015) a special contribution is imposed on the emoluments of private sector employees (half of which is contributed by the employer), pensioners and self-employed individuals according to the table below.
Temporary contribution rates 2015