Tax Residency in Cyprus
Non-Resident Cyprus Tax Law and the 60 Days Rule
Since the introduction of favourable provisions in the tax legislation for non-residents, Cyprus has become an attractive destination for high net rate individuals interested in tax optimisation. Primary among these provisions is the 50% discount to the employment income in the case of professionals receiving annual remuneration that exceeds €100.000. The discount is valid for the first 10 years since they become Cyprus tax residents regardless of the possibility of their annual remuneration falling below the threshold for the next years. In addition, the employment income is fully exempted if it derives from the individual’s employment outside Cyprus for a period exceeding 90 days, whereas the employer is not resident in Cyprus or the employment is exercised in a permanent establishment outside Cyprus to a Cyprus resident. Equally important is the tax exemption on profits deriving from the sale of securities such as shares, bonds and debentures with the exclusion of share value relating to immovable property.
How to Become a Cyprus Tax Resident in 60 days
Income Tax Law sets out the criteria according to which individuals or companies shall be considered Cyprus tax residents. Under the Law, individuals must stay in the Republic of Cyprus for one or more periods of time exceeding in total 183 days of the tax year (1st of January until 31st of December). Regarding companies, based on the same Law, the companies’ management and control must be exercised from Cyprus.
For individuals who don’t stay in the Republic for the required 183 days, there is an alternative option to obtain tax residency based on an amendment on the Law that took effect on 01/01/2017. According to this additional option, individuals who stay in Cyprus for a period or periods of time exceeding in total 60 days of the tax year, may obtain Cyprus tax residency if the following requirements are met:
- The individual does not stay in another country for a period or periods of time, exceeding in total 183 days of the relevant tax year.
- The individual is not considered a tax resident of another country for the relevant tax year.
- The individual must either maintain business or be employed in Cyprus or hold an office in a company that is a Cyprus tax resident, any time during the tax year. However, the individual will not be considered a tax resident for the tax year, during which the above business activities or employment are terminated, or they resigned from office.
- The individual must have a personal residence in Cyprus either through owning or renting a property in the Republic.
Non-Domicile Cyprus Tax Resident
Pursuant to the Special Contribution for the Defence of the Republic, tax residents domiciled in Cyprus must contribute to the Defence at the rate of 17% on dividends, 30% on bank deposit interest and 3% on 75% of gross rental income. Non-domicile tax residents are exempted from the above contribution obligation. According to the relevant Law, an individual is categorised as non-domicile if his domicile of origin given at birth is not Cyprus and:
i) The individual set a different country as his domicile of choice, by establishing a home in that country for the purpose of permanently or indefinitely staying there and for any period of 20 consecutive years prior to the relevant tax year was not a Cyprus tax resident, or
ii) The individual is not domiciled in Cyprus or is domiciled in a different country and he did not qualify as Cyprus tax resident for a period of 20 consecutive years prior to the enactment of the relevant Law, specifically prior to 16/07/2015.
In both cases, the exemption pursuant to the 20 years rule, does not apply when the non-domicile individual is a Cyprus tax resident for a period of 17 years out of the 20 consecutive years prior to the tax year.
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