Cyprus Health Care Premium Tax Amendments – Introduction
The Cyprus Tax Department has announced significant amendments to the tax treatment of health care plan premiums, effective from May 30, 2024.
These changes impact premiums paid by individuals for their own coverage and by employers for their employees, detailing deductions under Articles 9(1)(β) and 14(5) of the Cyprus Income Tax Law No. 118(I)/2002.
Key Provisions of the Cyprus Income Tax Law No. 118(I)/2002
- Article 9(1)(β): Annual contributions paid by an employer to a fund under Article 14 will be deducted from each person’s taxable income.
- Article 14(5): The tax department will grant a discount equal to the annual amount of the individual’s paid premiums.
Health Care Plan Tax Deduction Guidelines
For health care plans offered by insurance companies or employers’ funds, the tax deduction will be granted as follows:
- Employer’s Deduction: Deduction from the taxable income of the employer for the annual contributions paid to such a scheme, up to the amount of 1% of the emoluments of employees who are members of the scheme.
- Employee/Self-Employee Deduction: Deduction from the taxable income of the employee/self-employee for the annual contributions paid to such a scheme with a restriction of up to the amount of 1.5% of the income subject to income tax of the individual.
- Enhanced Deduction for Individuals: Deduction from the taxable income of the individual (employed/self-employed) for the annual contributions paid to such a scheme with a restriction of up to 2% of the income subject to income tax of the individual.
Additional Information
- The deduction applies to all contributions paid to all schemes in which the individuals participate.
- The deduction covers contributions for health care and dependent persons, including spouses and dependent children included in the scheme.
Income on Which the Deduction is Calculated
Individuals can receive a tax deduction for insurance premiums up to 1.5% or 2% (depending on the tax year) of their income from the following sources:
- Self-Employed Persons: Profit from business activities after deducting allowable expenses and gross rent.
- Salaries: Income from salaries, including overtime, allowances, and bonuses (excluding Ex Gratia payments and other non-taxable benefits).
- Other Income: Any other income subject to income tax.
Contribution Scenarios
Equal Contribution:
If the employer and employee each contribute 50% to cover the employee’s health plan, both can claim a deduction for the amount they have paid, subject to the previously mentioned restrictions.
Unilateral Employer Contribution:
The employer can claim a deduction for the full amount they contribute to the employee’s health plan, within the set limits.
Cyprus Health Care Premium Tax Amendments – Conclusion
The recent amendments to the tax treatment of health care plan premiums by the Cyprus Tax Department affect both individuals and employers.
These changes provide clear guidelines for deductions and discounts, ensuring equitable treatment and compliance for health care plans offered by insurance companies or employers’ funds.
Final thoughts
If you have any queries about Cyprus Health Care Premium Tax Amendments, or tax matters in Cyprus more generally, then please get in touch.