When you work or run a business in Cyprus, you often encounter benefits that are not paid in cash, such as a company car, free housing, school fees or gadgets.
These benefits fall under the term Benefits in Kind (BIK). They are fiscally relevant: by law, they are considered income and therefore taxable, unless specifically exempt.
In this guide I cover in a clear and accessible way:
What exactly BIK is:
- who falls under it
- the main categories of benefits
- how the value is determined
- which benefits are (possibly) not taxable
- practical checklists & tables
- strategic advice for entrepreneurs and expats
Use this blog as a guide to optimizing your salary or benefits package — and within the context of your move or business in Cyprus.
What is included in “Benefit in Kind”?
A Benefit in Kind is any benefit you receive from your work or position (as an employee or “office holder”) that is not (or not fully) paid in cash.
Concrete examples:
- Free or subsidized housing
- Company car also for private use
- School or childcare costs paid by the employer
- Free or cheap gadgets, trips, lunches
- Reimbursements for using your own car without a logbook (can lead to BIK)
Why relocation expenses are the hidden gem for expats and newcomers in Cyprus (up to €9,000 tax-free!)
Anyone moving to Cyprus to live, do business or work will immediately face costs such as:
- International move
- Shipping of goods
- Temporary accommodation
- Administrative costs
- Registrations
- Contract changes
- Etc…
However, Cypriot law offers a huge advantage:
- Relocation expenses are fully exempt from tax up to €9,000, as long as you can substantiate them with invoices or official documents.
This is literally described in the official information guide on Benefits in Kind, which makes it clear that relocation costs are not considered taxable benefits if they meet specific conditions.
Costs covered by this (according to the Benefits in Kind guideline):
- Transport & shipment of your household
- Flights and relocations
- Temporary accommodation
- Administrative costs (registrations, Social Insurance, Tax Department, Migration)
- Costs for installing and transferring your family
- Practical moving services, packaging, transport companies
Why this is so appealing
- Your first year in Cyprus will be much easier financially
- You can optimize the tax burden in your first months
- Your employer or own LTD may fully deduct these costs (business expenses)
- Your net salary is not affected
- It lowers the barrier to moving to Cyprus semi-permanently
Cyprus actively encourages international mobility and talent recruitment — relocation expenses are clear evidence of this.
1. Who is covered by these rules?
| People | Explanation |
|---|---|
| Employees (with or without a contract, full- or part-time) | All persons employed or working for a Cyprus resident company. |
| Persons holding an “office” or equivalent function | Directors, managers, persons with supervisory functions. |
| Family members / household members | When the benefit is provided to a family member through a relationship with the employee/entrepreneur. |
2. Three main categories of BIK
The guidelines classify benefits into three main groups:
| Category | Examples |
|---|---|
| Vehicles | Company car, van, car allowance, fuel costs. |
| Use of company property/housing | Free accommodation, use of boat/aircraft/machinery, furniture, asset use. |
| Other benefits | School or daycare costs, gadgets, discounts on products/services, free travel/meals, loans, etc. |
This classification helps you determine step by step whether something is taxable, how it is valued and how you can manage it.
3. How is tax calculated?
3.1 Vehicles
One of the most complex components. Three scenarios:
- Company car with private use
- Commercial van with private option
- Reimbursement of own car / mileage
Important formula:
BIK = % private use × (Car use value + Repairs & maintenance + Fuel value)
Indicative table:
| Car value | % private use* |
|---|---|
| up to €18,000 | 30% |
| €18.001-22.000 | 40% |
| €22.001-32.000 | 50% |
| €32.001-50.000 | 55% |
| > €50.001 | 60% |
Summary of key points:
- Car use value: 17% (or 8% if the car is older than 6 years) of catalogue value.
- Repair & Maintenance: usually 3% (up to a certain limit) or 4%.
- Fuel value: 3% or 5% depending on value.
- Logbook scheme: Mileage allowance up to €0.25 per km (with logbook)? No BIK (provided proof)
- Commercial van for private use: fixed flat-rate BIK (e.g. €500/year)
3.2 Housing & use of company properties
When an employee receives accommodation for free or at a low cost, BIK is created.
Calculation (example):
- 4% of the market value or cost price of the accommodation (whichever is higher).
- Plus: costs paid by the employer (electricity, water, maintenance)
- Min: any rent payment by employee
Example: Market value of apartment €200,000 ≤ 4% = €8,000 + utilities = taxable benefit.
Condition: exemption if the dwelling is necessary for the performance of the function (e.g. security, remote location) or is a government dwelling.
3.3 Other benefits
All other benefits are assessed based on market value or the difference between market value and the amount paid by the employee. Evidentrust Financial Services Ltd
Examples of points of attention:
- School costs, childcare
- Transport, travel private part
- Gifts above a certain limit (e.g. €300)
- Free or highly subsidized products or services
3.4 Exemptions / exceptions
There are important exemptions that are essential to utilize in your structure:
Some examples:
- Telephone/internet facilities (provided they are paid for at actual cost and can be demonstrated)
- Childcare on company premises
- Education and training directly related to the position
- Tools, uniforms, sports facilities (when for all employees)
- Relocation costs up to a certain limit
Why is this relevant to you in Cyprus?
As an entrepreneur or freelancer with a company in Cyprus: your salary structure and benefits can be tax-optimized, without any surprises afterwards.
As an expat/employee in Cyprus: you understand why a salary payment plus benefits package can work out differently “net”.
For relocation & low-tax planning: by cleverly applying BIK rules, you can legally reduce your tax burden while retaining your benefits.
Checklist & action plan for companies & expats
For companies (HR / Finance)
- Make sure you set up the “Benefits in Kind” file for each employee/director: benefit type, value, date of award.
- Keep logbooks for cars if you use mileage control.
- Use the correct form (e.g. T. ?.286A) for reduction of private use of car.
- Segment benefits and see which ones qualify for exemption.
- Process the BIK value correctly in the payroll administration and the annual employer declaration (TD7).
For employees / expats
- Ask clearly what benefits you will receive (car, housing, school, etc.).
- Ask about the valuation methodology for these benefits.
- If you use your own car: keeping a logbook can provide tax benefits.
- Consider how to minimize the tax value (e.g. through work-related function, housing required for position, etc.).
- Consult the situation if you are moving to Cyprus or working there: BIK rules may affect your net salary.
Frequently asked questions about the Fringe Benefits in Cyprus
My car is also registered in my private name, but is paid for by my Cypriot company. Is that BIK?
Yes, if the car is used privately outside working hours or is parked outside company premises during free time, this is considered a benefit in kind.
My company pays my children's school fees, does that fall under BIK (Burden Insurance)?
Yes, unless a specific exemption applies or it concerns training/education directly related to your position. This benefit will be taxable in most cases.
Can benefits be optimized so that I pay less tax?
Yes, by using exemptions and the correct valuation method. For example, if housing is necessary for performing a job, the regulations will be different. Logbooks for cars, work-related training, etc.
