The General Healthcare System in Cyprus
The Health Insurance Organisation (HIO) is a legal entity governed by public law that was established in accordance with the Law on the Introduction of the General Healthcare System (GHS) in Cyprus.
Its main mission is to tackle the distortions and inequalities of the present healthcare sector, to take full advantage of the available health resources of both the private and the public sector and to secure access to the resources.
According to the provisions of The General Healthcare System (Amending) Law of 2017, the GHS shall be implemented in two stages. The first stage of GHS implementation will begin on the 1st of June 2019, providing for the introduction of outpatient healthcare, for which the collection of the contributions started on the 1st of March 2019.
The second and final stage of GHS implementation will begin on the 1st of June 2020, including the introduction of all the remaining healthcare services.
The present brochure aims to provide an overall information as to the application of the GHS Law of 2001 (N. 89(I)/2001) as amended, that governs the implementation of the GHS, with particular focus to the categories of beneficiaries, the contributors’ categories and contribution rates, the interpretation of insurable income, the applicable exceptions, followed by brief examples for the better understanding of the application of the law.
B. WHO THE BENEFICIARIES ARE
All citizens who are permanent residents in the areas controlled by the Republic of Cyprus and come under one of the following categories:
European citizens who work or hold a permanent residence status in accordance with the provisions of the national legislation
Third country nationals (non-EU citizens) who hold a permanent residence status or a right of equal treatment in accordance with the provisions of the national legislation
Members of the families of the above categories in accordance with the provisions of the national legislation
Refugees and persons with a status of supplementary protection
C.CONTRIBUTORS’ CATEGORIES AND CONTRIBUTION RATES
D. INTERPRETATION OF INCOME SUBJECT TO GHS CONTRIBUTIONS
The following categories of physical persons will have to determine the type of income on which GHS contributions are paid.
I.Cyprus Tax Resident Individual
As a general principle, the world-wide income is taken into account for GHS purposes. The income of a Cyprus Tax Resident individual on which GHS contributions are paid, is specified below:
a. The income in relation to employees includes:
the monetary compensation received under the employment
any profit received under the employment which has a monetary value
the employer’s contribution to the Central Holiday Fund
b. The income in relation to self-employed includes:
any profit or benefits received under the employment
any profits or other benefits received from any business
profit from the disposal of securities, if such profit is considered to be trading profit
c. The income in relation to officers includes:
any profits or other benefits received from the holding an office or salaried services
any Benefits in Kind provided to the officer, such as accommodation or any other allowance (for further details on Benefits in Kind, you may refer to our brochure “THE TAXATION OF BENEFITS IN KIND IN CYPRUS”)
Individual Directors and Secretaries are considered persons holding an office and are treated similarly to the employees. Therefore, their remuneration is subject to GHS contributions. The responsible person for withholding the relevant contributions is the company paying the remuneration. The company will need to withhold the contributions from the officers and pay the relevant contributions as employers do.
d. The income in relation to pensioners includes:
any pension received for any employment exercised in the Republic
any pension received from overseas sources
e. The income in relation to income-earners includes:
Rental income (world-wide)
Dividend income (world-wide, including deemed dividends)
Interest income (world-wide)
Income received in accordance with a court decision or in accordance with a term included in a will or agreement, as well as an annuity;
Rent, royalties, remuneration or other profits arising from property, including the value of the owner’s benefit
9% deemed benefit that is related to interest free financial assistance provided by Cyprus companies to directors or shareholders.
It is important to note that although the GHS Law of 2001 (N.89(I)/2001) refers to income specified in the Article 5 of the Income Tax Law, any exemptions applied for Income Tax purposes, do not apply for GHS purposes.
Expatriates who reside in Cyprus for a period of over 183 days in the year 2019, are considered to be Cyprus Tax Residents for the whole year, and as such, they pay income tax on the income received from Cyprus and overseas sources as well (world-wide income). For GHS contributions purposes, their world-wide income is taken into account, and in this respect GHS contributions will be paid on any remuneration received from employment which has been exercised abroad. The said contributions are paid via self-assessment.
II. Cyprus Tax Resident but non-domiciled Individual
Cyprus tax resident but non-domiciled individuals are not exempted from the GHS contributions. Subsequently, the income of such individuals that is subject to GHS contribution is the income as specified in section D(I), including the world-wide income such as overseas pensions, interest, dividends and rental income.
The exemption of the non-domiciled individuals on interest, dividends and rental income under the Special Defence Law, is not applied for GHS purposes.
III. Non-Cyprus Tax Resident Individual
Physical persons who are not Cyprus tax residents but they do derive income from the Republic of Cyprus, have the obligation to pay contributions on the income, earnings and pensions specified in section D(I) derived from the Republic, excluding dividends and interest.
E. MAXIMUM ANNUAL INSURABLE AMOUNT
For every physical person, the total maximum annual amount on which contributions are payable is the amount of €180,000.
The cumulative order in order to calculate the amount of €180,000 is as follows:
Income (e.g. rents, dividends, interest)
It should be noted that also the amount of contributions that the employer contributes on the salaries paid is subject to the threshold of €180,000.
According to the instructions given by the HIO, income which is derived from different Cyprus sources (i.e. different entities), is subject to the threshold of €180,000, for each source separately.
It is also worth mentioning, that in case that different types of income are derived from the same source (i.e. the same entity), the GHS contributions on the employment income will continue to be deducted, irrespective of whether the total of all types of income that have suffered GHS contributions, exceeded the threshold of €180,000 (since such income is subject to GHS contributions not only from the employee, but also from the employer and the state).
In the case that in a calendar year contributions were paid on an amount in excess of the €180.000, then the contributor has the right to apply for a refund for the overpaid contributions via an application through the HIO.
F. COLLECTION OF THE GHS CONTRIBUTIONS
Depending on the type of income, the below Governmental Departments are responsible for the collection of the GHS contributions:
the Social Insurance Department (SI),
the Tax Department and
the Treasury of the Republic of Cyprus (applicable for income from the Republic)
I. Collection of the GHS contributions from the Social Insurance Department
As a general principle, the Social Insurances Department collects the GHS contributions on the income specified under the Social Insurances Law.
The collection of the GHS contributions will follow the same procedure as already followed for the collection of the Social Insurance Contributions (including the collection of the GHS contributions on the pension income).
II. Collection of the GHS contributions from the Tax Department
The Tax Department collects the GHS contributions on the income as specified under the Article 5 for the Income Tax Law and the Special Defence Law.
The collection of the GHS contributions will follow the same procedure as already followed for Income Tax and Special Defence Contributions (SDC) purposes.
The timely payment of contributions will be executed through the principal online payments hub in Cyprus, called JCC smart. Any overdue GHS contributions will be paid to the Tax Department’s cash desk, until further notice.
G. EXEMPTIONS FROM THE OBLIGATION FOR GHS CONTRIBUTIONS
The following types of income are not subject to GHS contributions:
1. Any income that is not subject to Income Tax Law based on Article 5, governed by other laws. For example:
income from preserved buildings,
income which is exempt under the Cyprus Tonnage Tax Regime (i.e. dividends from qualifying shipping activities)
2. Physical persons, or income exempted under International conventions signed by the Republic, and under EU Legislation. For example:
income associated with the United Nations
Income of individuals who are insured in another EU Member State (A1/S1 certificate should be submitted).
An individual holding the A1/S1 certificate is not liable to pay GHS contributions on any salaried, self-employment or pension income, although, liability to pay GHS contributions may emerge, if any other income is received.
3. Lump sum amounts paid from the Provident Funds/Pension Funds of the public and private sectors, and the lump sum amounts paid to the civil-service employees.
H. BRIEF EXAMPLES
A.HOW KINANIS LLC CAN ASSIST
Kinanis LLC is in a position to assist you with the provision of the following services:
Full Payroll Services
Advisory services on the application of the GHS Law, Social Insurance Law, Income Tax Law
Computation and payment of the GHS contributions to the responsible departments
Submission of the relevant forms to the Authorities, where applicable
Application for refund of excessive GHS contributions paid
This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.
Associate - Accounting & VAT Department
Kinanis Law Firm, is a Law and Fiduciary Firm with offices in Cyprus and Malta and a representative office in Shanghai China. The Firm advises for over 35 years international investors and private clients offering legal and consulting services since 1983.
Experience and practice over the years brought forward the need for transformation from a traditional law firm to a more innovative multidisciplinary firm providing a full range of services combining law and accounting with extensive expertise in corporate, tax and vat advice to ensure that our clients will obtain the best possible spherical advice adopting the principle as to the services offered "All in one place", so that the clients will find a quick, correct and efficient solution to their daily legal, accounting, vat and tax issues in a trustworthy environment.
The Firm employs approximately 80 lawyers, accountants and other professionals.
Our clients benefit from a complete range of legal, accounting, tax, vat and advisory services from a highly specialized team of professionals.
We consider ourselves as ‘traditional pioneers’ and our motto is to foresee and anticipate any issues that may potentially impact our clients’ business and to offer effective advice and solutions proactively.
This combination of legal, accounting, vat and tax services through our well qualified personnel and our involvement and participation in international transactions over the years, have established our firm as one of the key players in the field. Our involvement in international financial transactions has also provided us with the extensive expertise in representing groups, corporations, funds as well as the private client.
Lawyers’ Limited Company
12 Egypt Street, 1097, Nicosia
P.O. Box 22303, 1520 Nicosia, Cyprus
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Kinanis Law Firm
Kinanis Fiduciaries Limited
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KINANIS LAW FIRM is the service mark through which Kinanis LLC of Cyprus, Kinanis Fiduciaries Limited of Malta and their affiliated companies are conducting business each of which is a separate legal entity.