All individuals employed in Cyprus – both employed and self-employed – are obliged to make Social Insurance Contributions based on their earnings; monthly in the case of those employed, and quarterly for those self-employed. One feature of this system, up to this point, has been the manual nature of the process. Individuals, employers or their representatives have been required to physically present themselves at the relevant Government office in order to make the relevant cash, cheque or card payment, together with the presentation of the necessary documentation. It is, therefore, welcome news that finally there are plans to move everything online.
Cypriot legislation requires employers to calculate Social Insurance Contributions based on the monthly emoluments of their employees, and pay them within a month of the applicable contribution period i.e. within one month retrospectively. In the case of the Employee, their share is deducted automatically from their earnings by the employer, and paid on their behalf to the Government.
The current Social Insurance Contribution rates are as follows:
| Employer | Employee | |
| Social Insurance | 7.8% | 7.8% |
| Redundancy Fund | 1.2% | NIL |
| Industrial Training | 0.5% | NIL |
| Social Cohesion | 2% | NIL |
In addition, there is a holiday fund of 8% which most businesses can claim exemption from by proving that they offer their employees paid leave as part of their conditions of employment.
The Social Insurance, Redundancy Fund and Industrial Training contributions are restricted to €54,396 annually (equivalent to €1,046 per week or €4,533 a month). However, the Social Cohesion Fund part is unlimited and is not regarded as deductible for the purposes of calculating corporation tax.
Failure to pay contributions on time leads to penalties which range from 3% to 27%, depending on the period of time that the payment has been delayed, and the amount of the contributions due.
Self-employed contributions are paid on a quarterly basis as follows:
- January to March – must be paid by the following May 10th;
- April to June – must be paid by the following August 10th;
- July to September – must be paid by the following November 10th; and
- October to December – must be paid by February 1oth of the following year.
There are minimum limits of annual income on which self-employed people must pay social insurance contributions, and these vary by profession such as:
| Occupation | € |
| Persons exercising a profession:
· For a period under 10 years · For a period exceeding 10 years |
19,949 40,351 |
| Wholesalers, estate agents, insurance agents, manufacturers and other businessmen | 40,351 |
| Clerks, typists, cashiers, secretaries | 19,496 |
| Shopkeepers | 18,589 |
| Designers, computer users, marine engineers | 19,949 |
This list is not exhaustive, but AJD Consultants can advise if a particular occupation is not covered above.
Despite all this, the intensively manual nature of the Social Insurance payment system has made this a very ineffective process hitherto. This is why the announcement that the whole system is going to be automated so that payments and monthly submissions can be made online is very welcome. Launched under the joint auspices of the Ministry of Labour, Social Insurance and Welfare, and the Social Insurance Services, the new system aims to improve the productivity and effectiveness of both the private and the public sector, whilst aiming to eliminate the waste of productive time.
Under the slogan “Do It Electronically”, a special website has been created, giving taxpayers more information and allowing them to register for the scheme (http://www.kepa.gov.cy/yka/).
Unfortunately the website is currently only available in Greek, so AJD Consultants has contacted the department responsible, asking when an English version will be available.