National Health Insurance System

Introduction

The National Health Insurance System (“NHIS”) is introduced in Cyprus during 2019 and transforms the existing public healthcare system. Patients will have the freedom to choose their healthcare provider, both from the private as well as the public healthcare sector, from those providers registered with the Health Insurance Organization (“HIO”).

The NHIS is a national healthcare system, financed mainly through compulsory contributions of employees, employers, self-employed persons, pensioners, persons earning other types of income and the government.

Beneficiaries for health care provision

The beneficiaries for participation in NHIS, as defined in the relevant legislation, are listed below:

1. a citizen of Cyprus
2. a European Union citizen who is employed or self-employed in Cyprus or who retains such status or has acquired the  right of permanent residence in Cyprus
3. a third-country citizen who has legally acquired his/her right of permanent residence in the areas controlled by the Republic of Cyprus
4. a third-country citizen who has acquired a legitimate right for equal treatment in the area of social security
5. a recognized refugee or person with a supplementary protection status
6. members of the families of the persons specified in paragraphs 1,2 and 4 above
7. members of the families of the persons defined in paragraph 3 above and who have legally acquired the right of  permanent residence in the areas controlled by the Republic of Cyprus
8. any citizen of Cyprus who has his habitual residence in the territory of the Sovereign British Sovereign base areas  in Cyprus and any member of their family

Member of the family’ means a spouse, children under the age of 21 as well as children over the age of 21 who are dependent on that person.

Commencement of payment of NHIS contributions

The payment of contributions commences on 1 March 2019 and initially the contributions will only cover outpatients, while as from 1 March 2020, the contributions will be increased in order to cover both outpatients and inpatients.

The Republic of Cyprus contributes to NHIS at the percentage of 1.65% as from 1 March 2019 (increasing to 4.70% as from 1 March 2020) on the contributions specified on the categories (a), (c), (d) and (e) above.

Definition of an employee

The Social Insurance Law defines as an employee a person who carries out any insurable employment as defined in the First Schedule of the Law and which is set out below:

1. employment in Cyprus of a person on the basis of a contract of employment or apprenticeship, or under such
 circumstances, where it can be concluded that there is an employer and employee relationship, including employment  with the Office of the Republic
2. employment of a person by contract or under the circumstances referred to in paragraph 1 above, where that person has
 his habitual residence in Cyprus and serves as captain or crew member of a vessel under the flag of the Republic or as  governor or crew member of an aircraft, the owner or manager of which has its principal place of business in Cyprus
3. employment of a person in any prison of the Republic serving a sentence of imprisonment
4. training of a person in Cyprus on the basis of a vocational training program
5. employment of a person under any circumstances in a private company, in which he is a shareholder
6. exercise of the clergy function
7. employment of a citizen of Cyprus in diplomatic missions of Cyprus abroad, with the status of local staff, provided that he is not insured under the legislation of the receiving State

The following are considered as exempt employments:

1. employment of any member of the naval, military and air forces of the Government of a country other than Cyprus
2. employment in the public or diplomatic service of the Government of a country other than Cyprus when the person employed is hired outside Cyprus
3. employment in the service of the spouse of the person employed
4. employment of a person who has not his permanent residency in Cyprus or in another Member State, to an employer’s service who has neither his habitual residence or registered office in Cyprus nor the place of business in Cyprus
5. agricultural employment in the service of the father or mother

Method of payment of contributions and liability for their payment / deduction

1. Employees’ contributions to NHIS will be deducted by the employer from the total earnings of the employees (as defined in the Social Insurance Law) and, together with the employer’s contributions, will be paid to the Social Insurance Fund, as in the case of the respective contributions to the Social Insurance Fund. The maximum annual insurable earnings for employees applicable for the purposes of Social Insurance Fund contributions do not apply in the case of NHIS.
2. Self-employed persons’ contributions to NHIS on the sums for insurable earnings provided for contributions to the Social Insurance Fund are paid to the Social Insurance Fund, whereas contributions on income of self-employed persons beyond these sums are paid to the Tax Commissioner.
3. NHIS contributions on pensions are deducted by the person paying the pensions and paid to the Tax Commissioner, except for the pensions paid to the pensioners by the Social Insurance Fund, which are deducted from the pension and are paid to NHIS. The contributions on pensions received from abroad are paid to the Tax Commissioner by the pensioner himself.
4. NHIS contributions on officers’ remuneration are deducted by the Republic or the person paying the remuneration and are paid to the Tax Commissioner.
5. NHIS contributions on dividends or interest received by an individual from sources within Cyprus are deducted by the payer (as in the case of the special defence contribution on the relevant income) and paid to the Tax Commissioner.
6. NHIS contributions on rents received by an individual from sources within Cyprus are deducted by the payer, provided that the payer is a company, partnership, the Republic of Cyprus or a local authority (as in the case of special defence contribution) and paid to the Tax Commissioner.
7. NHIS contributions on rents received by an individual from sources within Cyprus by another individual and for which no deduction is made under paragraph 6 above are paid to the Tax Commissioner by the individual who receives the rents.
8. NHIS contributions on income from abroad or on any other income not mentioned above, are paid by the individual who receives them to the Tax Commissioner.
9. It is noted that the total amount of the annual income of an individual on which contributions are paid to NHIS is 180.000 euro.
10. It is expected that more practical guidance will be provided with regards to deduction and payment of the above contributions to NHIS.

Important note: This article has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice from a qualified accountant.