Tax News Letter- Cyprus National Health System (Cyprus NHS)
April 2019
Dear Clients and Associates,
The much awaited and debated Cyprus National Health System (NHS) will commence operations later this year while the relevant contributions (taxation to finance the NHS) commence as of 01 March 2019 (‘NHS Contribution’). The NHS Contribution is calculated on the amount of income streams earned by (i) a Cyprus tax resident physical person (irrespective if he is classified as non-domiciled or not), or (ii) a non-Cyprus tax resident person on designated Cyprus source income. The aforesaid income streams are broadly defined and include dividend (as well as deemed dividend as from 31 December, 2019), interest and rental income streams. The NHS Law contains cross-references to existing laws (such as the Cyprus Corporate Income Tax Law and Special Defence Contribution) for defining income streams from employment or from operating a business or holding an office. Equally it contains crossreferences to the Social Insurance Law for interpretation of the categorisation of the payer of NHS Contribution.
Beneficiary of medical treatment or related benefits and services from the NHS is every citizen of the Republic of Cyprus either via public hospitals or from private clinics and doctors who have registered themselves for offering NHS services. Below is a brief (illustrative summary) on (I) the NHS Contributions per type of payer, who bears the responsibility to administer and pay the NHS Contribution, and (II) outline of income streams on which the NHS Contribution is applied.
Other relevant considerations Monetary threshold: NHS Contributions have an income cap of Eur 180,000. Hence no NHS Contribution applies to income exceeding the ceiling of Eur 180,000, applying below income ranking until the cap is reached. NHS Contributions are calculated and applied in the following order: (i) employee, (ii) employer, (iii) self-employed and then pensions and other incomes. The timing for payment of the NHS Contribution will largely follow their type, meaning it will follow the same pattern of payment as for withholding income tax on emoluments or taxation through selfassessment for dividend, interest etc. The NHS Contribution will be allowed as deductible on the face of computation of the personal taxation (normal rules apply). Failure to comply with the NHS rules will result in monetary penalties.
SCORDIS, PAPAPETROU & CO (C O R P O R A T E S E R V I C E S ) L T D
TABLE I – NHS Rates by Payer / Paying party / Authority
| Payer of the NHS Contribution | Amount of NHS Contribution | Obligation to administer, withhold and pay the NHSContribution | Authority collecting the NHS Contributions | ||
| Employee | 1,7% (until 28/02/2020), 2.65% (from 1/03/2020) on its emoluments | Employer | Commissioner of Social Insurance | ||
| Employers | 1,95% (until 28/02/2020), 2.90% (from 1/03/2020) on its emoluments | Employer | Commissioner of Social Insurance | ||
| Self-Employee | 2,55% (until 28/02/2020), 4% (from 1/03/2020) on its emoluments | Self-Employed | Commissioner of Social Insurance | ||
| Officer, Holding Office | 1,7% (until 28/02/2020), 2,65% (from 1/03/2020) on its emoluments | Person paying the emoluments. | Commissioner of Taxation | ||
| Employers of Officials | 1,95% (until 28/02/2020), 2.90% (from 1/03/2020) on its emoluments | Commissioner of Taxation | |||
| Pensioners | 1,7% (until 28/02/2020), 2,65% (from 1/03/2020) on its pension | Person paying the pension. | Commissioner of Taxation | ||
| Earning other income | 1,7% (until 28/02/2020), 2,65% (from 1/03/2020) on its other income. | Person paying the income if derived from sources within the Republic, recipient in all other cases | Commissioner of Taxation | ||
TABLE II – Income streams attracting NHS Contribution
| Type of income | Cyprus Tax Resident | Non-Cyprus Tax resident |
| Emoluments from within Cyprus | X | X |
| Emoluments from outside Cyprus | X | – |
| Benefit in kind stemming from employment in the Cyprus | X | X |
| Self-employed Cyprus source income | X | – |
| Pension stemming from employment in Cyprus | X | X |
| Dividend income (Cyprus source or not) | X | – |
| Deemed Dividend | X | – |
TABLE II – Income streams attracting NHS Contribution
| Type of income | Cyprus Tax Resident | Non-Cyprus Tax resident |
| Emoluments from within Cyprus | X | X |
| Emoluments from outside Cyprus | X | – |
| Benefit in kind stemming from employment in the Cyprus | X | X |
| Self-employed Cyprus source income | X | – |
| Pension stemming from employment in Cyprus | X | X |
| Dividend income (Cyprus source or not) | X | – |
| Deemed Dividend | X | – |
SCORDIS, PAPAPETROU & CO (CORPORATE SERVICES) LTD
| Rental income from Cyprus properties | X | X |
| Interest income from bank deposits (domestic and foreign) | X | – |
Keynote Point
The NHS Contributions require relevant computations and filings to be made in addition to prior filing Obligations. We can assist in computing the expected NHS contribution that may be payable on the expected annual sources/types of income and administer the NHS Contribution, the completion and filing of relevant returns to ensure compliance with relevant Laws and Regulations.