Cyprus tax guide: Benefits for Individuals not domiciled in Cyprus
Any individual who is a Cyprus tax resident under the 183 days rule and/or under the 60 days rule (see below) who at the same time is not domiciled in Cyprus, enjoys the following tax benefits:
i. Exempt from Special Defence Contribution
ii. Exempt from tax on dividend worldwide income
iii. Exempt from tax on passive interest worldwide income
iv. No Special Defence Contribution on rental income
In addition, individuals who were not Cyprus tax-residents prior the commencement of their employment in Cyprus may be entitled to the following non-cumulative exemptions:
i. If their annual income exceeds €100.000, they will be eligible for an exemption from taxation of 50% of their income for a period of 10 years
ii. In all other cases they will be eligible for an exemption from taxation of 20% of their income or €8.550 (whichever is lower)
Cyprus tax guide: Benefits for Individuals irrespective of domicile
Notwithstanding the above, Cyprus tax residents who are not domiciled in Cyprus also enjoy the following universally applicable features:
i. No immovable property taxes
ii. No inheritance and gift taxes
iii. No wealth taxes
iv. Favourable income tax on worldwide income
v. Profit from the sale of securities (shares, bonds, debentures etc) is exempt from taxation except in cases where the value of the shares is derived from immovable property located in Cyprus
vi. 100% exemption on remuneration for salaried services rendered outside Cyprus for more than 90 days aggregate in a tax year to a non-Cyprus employer
Cyprus tax guide: How is domicile determined?
Domicile is defined in accordance with the provisions of the Cyprus Wills and Succession Law. In a nutshell:
- Domicile of origin is the domicile received at birth
- Domicile of choice is the domicile acquired by an individual by establishing a home with the intention of a permanent or indefinite stay
An individual can be a Cyprus tax resident under the 183-day rule or under the 60-day rule and at the same time considered as non-domiciled in Cyprus for a maximum of 17 years.
Individuals who have been tax resident in Cyprus for at least 17 out of the last 20 years prior to the tax year in question, will be deemed to be domiciled in Cyprus.
Cyprus tax guide: 183 days residency rule
Cyprus tax residency is determined solely by the number of days of actual stay in Cyprus.
According to the Income Tax Law of 2002, any individual who is physically present in Cyprus for more than 183 days in a tax year will be considered a tax resident of Cyprus for that specific tax year without any other conditions. Accordingly, any individual who is physically present in Cyprus for less than 183 days in a tax year will considered to be a non-Cyprus tax resident.
Cyprus tax guide: 60 days residency rule
In 2017 the Cyprus House of Representatives revisited the Cyprus Income Tax Law and introduced the 60 days rule which supplements the 183-day rule. According to the 60-day rule, an individual who does not stay in any other country for a period exceeding in aggregate 183 days in a tax year and is not tax resident in any other country for the same year, is deemed as a resident in Cyprus in that tax year if the following cumulative conditions are met:
i. Spend at least 60 days in Cyprus in the year of assessment
ii. Carry out business and/or be employed and/or hold an office (e.g., director) in Cyprus at any time during the year of assessment
iii. Maintain (by owning or leasing) a permanent residence in Cyprus
The 60-day rule is arguably an alternative and convenient route for individuals who cannot physically spend 183 days in Cyprus.
Note: If during the tax year in question the condition set out in point (ii) above ceases to apply the individual will not be treated as a Cyprus tax resident.
Cyprus tax guide: How are days calculated?
To calculate the days spent in Cyprus note should be given to these parameters:
i. The day of departure from Cyprus counts as a day of residence outside Cyprus
ii. The day of arrival in Cyprus counts as a day of residence in Cyprus
iii. The arrival in Cyprus and the departure from Cyprus on the same day is deemed to be a day in Cyprus
iv. The departure from Cyprus and the arrival in Cyprus on the same day counts as one day of residence outside Cyprus.
Cyprus tax guide: How to register a Cyprus tax resident?
The registration of individuals with the Cyprus tax authority is a straightforward process.
The interested individual should firstly arrange a meeting and obtain an Alien Registration Code (ARC) from the Immigration Department. In the case of EU individuals, this meeting is a mere formality.
Thereinafter, a Cyprus tax residency should be requested from the Cyprus Tax Department.
Cyprus tax guide: How can we help?
Our team through its trusted partners is fully adept in providing the following services:
- Reviewing each situation and providing advice as to the prospects of obtaining Cyprus Tax residency
- Assisting with the preparation and submission of the relevant forms and applications
- Communicating with all competent authorities and ensuring a streamline process
- Obtaining a Cyprus tax residency certificate (where required)
Please contact us by telephone at +357 22272183 or email at info@lelaw.com.cy for a complimentary consultation.
We will simply review your situation and provide you with the optimal solution.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide and does not constitute legal or professional advice, nor should be perceived as such. We recommend that you seek professional advice on a specific matter before acting on any information provided.
Note: Obtaining a new personal tax residency does not mean that the person concerned has automatically stopped being considered a tax resident in respect of any other jurisdiction.