How an individual can acquire Cyprus Tax Residency?
By: Danos & Associates
The 183 days rule
It is well known that individuals who spend more than 183 days during a tax year (the period from 1st January until 31st December) in Cyprus are considered a Cyprus Tax Resident (Income Tax Law of 2002). Thus, if an individual is physically present in Cyprus for more than 183 days, he/she can be considered as a Cyprus tax resident.
The 60 days rule
However, on 14 July 2017, the Cyprus Parliament has amended the residency-based system of taxation law by introducing a second rule which is called “the 60-day rule”. This tax law amendment which has been published and it is applicable since the 1st of January 2017, offers the option of acquiring the Cyprus tax residency to foreign individuals after spending only 60 days in Cyprus, provided that all of the following certain additional conditions are met:
- The individual stays in Cyprus for at least 60 days in the tax year.
- The individual does not reside in any other country for a period exceeding 183 days during the tax year.
- The individual is not a tax resident of any other country.
- The individual is employed in Cyprus and/or conducts business in Cyprus and/or holds an office and is a director of a Cyprus tax resident company at any time during the tax year. However, it is significant to be mentioned that the individual will not be considered as a Cyprus Tax resident if the conducting of business and/or the holding of a directorship of a Cyprus tax resident company and/or the employment in Cyprus are ceased before the 31st of December of the relevant tax year.
- The individual maintains a permanent residence in Cyprus which can be owned or rented by the individual.
Benefits of acquiring Cyprus Tax Residency
In general, individuals who are Cyprus tax residents, whether under the 183-days rule or the 60 days rule, are subject to tax in Cyprus in their worldwide income. However, there are certain exemptions, as follows:
- Individuals who are Cyprus tax residents under the aforementioned rules but are not domiciled in the Republic of Cyprus will be granted an exemption from income tax and special defense contribution tax on dividends, interest received and rental incomes either in Cyprus or abroad for the next 17 years.
- Individuals employed in Cyprus who were not previously tax residents in Cyprus and they are not permanent residents of Cyprus, will enjoy 50% income tax exemption of their remuneration for a period of 10 years commencing from the year of employment, if their income exceeds the amount of €100.000 per annum and on the assumption that they will acquire the tax residency in Cyprus for the first time.
- Individuals employed in Cyprus who were not previously tax residents in Cyprus and they are not permanent residents of Cyprus will enjoy 20% exemption with a maximum amount of €8.550 annually on income from employment which is exercised in Cyprus. This exemption applies for a period of five years and it is applied up to and including the year 2020.
- Individuals who are employed outside of Cyprus to a non-Cyprus tax resident employment or a foreign permanent establishment of a Cyprus tax resident employer for more than 90 aggregate in a tax year, are exempted from income tax.
- Profits from the sale of securities are exempt from taxation in Cyprus. Securities include inter alia shares, bonds, debentures, options, etc. However, this exemption is not applied in cases where the value of the shares derives from immovable property in Cyprus.