Cyprus hikes social contributions in 2019; introduces NHIS

Cyprus Social Insurance Fund (SIF) contributions will increase starting from January 2019 while contributions for the implementation of the National Health Insurance System (NHIS) will commence in March 2019.

Social Insurance Contributions rate hikes from 2019

As from 1 January 2019, an additional rate of contribution to the Social Insurance Funds will be increased by 0.5 percentage points both by the employer and by the employee, effectively raising the rate from 7.8% to 8.3%. Further increases as detailed below will be applied in future years:

Contribution Rates:

• 21.5% from 1.1.2019: 8.3% will be deducted from employer and 8.3% from employee
• 22.8% from 1.1.2024: 8.8% will be deducted from employer and 8.8% from employee
• 24.1% from 1.1.2029: 9.3% will be deducted from employer and 9.3% from employee
• 25.4% from 1.1.2034: 9.8% will be deducted from employer and 9.8% from employee
• 26.7% from 1.1.2039: 10.3% will be deducted from employer and 10.3% from employee

Introduction of National Health Insurance System (NHIS)

The implementation of the national health insurance system is projected to start on 1 March 2019, initially covering only outpatient care, with full implementation expected to be finalized by June 1, 2020. Currently the national health system in Cyprus is financed entirely by the government budget for care provided by government-owned health centers so this represents a major change for Cyprus. The new system will provide equal access for all Cypriots to the same healthcare without restrictions.

The NHIS will be financed through individual, employer and government contributions. Initially, the contributions are set to 1.70% for employees and pensioners, 1.85% for employers, 1.65% for the government, and 2.55% for self-employed individuals. A year later – starting from 1 March 2020 – the contributions to cover both outpatient and inpatient care will be amended to 2.65% for employees and pensioners, 2.90% for employers, 4.70% for the government and 4% for self-employed. The contributions will be deducted from the entire earnings of the employee up to €180,000.

The NHIS, in combination with the qualified doctors, medical labor force and advanced technological capabilities will contribute to growth of the health sector in Cyprus. It will offer opportunities for the country to develop its Medical Tourism and capitalize on its recognized researchers as well as to further contribute medical science.

If the system is implemented as planned, it should reduce out-of-pocket spending and eliminate benefits such as employer-provided supplemental health insurance which is widely used in Cyprus. On the other hand, it will unavoidably mean higher payroll costs for both employers and employees. Additionally, the new system will require careful attention to be paid during the transition process.

Our team in Cyprus is available for questions and clarifications related to the upcoming changes and is at your disposal to provide compliant, accurate, and professional outsourced payroll services tailored to your specific needs.

Christina Christou,
Maria Nicolaou,
Eurofast Cyprus

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