Πως να πληρώνετε λιγότερους φόρους με την Ασφάλιση Ζωής
As We Enter the Tax Declaration Period for the Previous Year
It’s a great opportunity to explore how we can all take advantage of the provisions of the law regarding Life Insurance Policies. By doing so, we can not only pay less in taxes but also provide protection for ourselves and our families.
While taxes may not be anyone’s favorite subject, they are an integral part of life for every citizen and significantly affect both their financial situation and how they manage their finances. As such, everyone seeks legitimate ways to reduce the taxes they pay at the end of each year.
One of the most effective ways to achieve this is through Life Insurance, as the law in our country offers specific tax deductions. Let’s see how insurance can help us pay less in taxes!
Taxation in Cyprus
Every individual who is a tax resident of Cyprus is taxed on income earned or originating from both Cyprus and abroad. Those who are not tax residents of Cyprus are only taxed on income derived from sources within Cyprus.
A person is considered a tax resident of Cyprus if they stay in the country for more than 183 days in a year. Additionally, under certain conditions, they may be considered a tax resident if they stay in Cyprus for one or more periods totaling 60 days.
The following tax rates currently apply in Cyprus:
| Taxable income from | Taxable income to | Tax rate | Tax calculation | Cumulative Tax |
| € | € | % | € | € |
| 0 | 19.500 | 0 | 0 | 0 |
| 19.501 | 28.000 | 20 | 1.700 | 1.700 |
| 28.001 | 36.300 | 25 | 2.075 | 3.775 |
| 36.301 | 60.000 | 30 | 7.110 | 10.885 |
| 60.001 | And above | 35 |
What About Life Insurance?
As mentioned earlier, the tax system in our country provides specific tax deductions for individuals. These include Life Insurance premiums, contributions to Social Insurance, and GHS (GeSY). According to the current legislation, these deductions must not exceed 1/5 of taxable income, and the annual premium must not exceed 7% of the insurance coverage.
An Example
For our example, let’s consider an individual earning €50,000 annually from salaried work. This translates to €3,846 per month over 13 months.
This person will contribute 8.8% of their income to the Social Insurance Fund, amounting to €4,400. Additionally, they will contribute 2.65% to GHS, which equals €1,325.
Since 1/5 of their income is €10,000, they have €4,275 remaining for Life Insurance premiums that qualify for tax deductions according to their income tax bracket.
In this example, the individual falls into the 30% tax bracket. By paying the maximum allowable premiums, they would save €1,282.50 in taxes (€4,275 x 30%).
The Key Point
It’s reasonable to argue that in the above example, the household budget increases by €2,993, as they pay €4,275 in premiums but save €1,282.50 in taxes.
This would be true if we ignored the essence of life insurance, which is to protect our loved ones if something happens to us.
Effectively, this individual offers their loved ones life insurance coverage corresponding to premiums of €4,275 while actually paying only €2,993.
Tax incentives are not provided by the state simply to reduce taxes. If that were the case, they could just lower the rates. Tax incentives are always given with a specific purpose. In our case, the aim is to encourage people to insure their lives and plan for the future—for themselves and their loved ones.
Proper Tax Planning
At Nimela Insurance, with over 20 years of experience in Life Insurance, we can help you. With the support of Insurance Advisor Fidias Papanikolaou, we can create a comprehensive insurance plan together to help you pay less in taxes!
Contact us today for a free consultation!