As of 14 July 2017, the Cyprus House of Representatives voted a bill that amended the law for the criteria for determining the rights of an individual to be considered as a tax resident of Cyprus.
In the past, for an individual to be eligible to be considered as tax resident of Cyprus, he/she had to remain in Cyprus for 183 days in one year.
As per the new law, the below three criteria must be met for an individual to be considered as tax resident of Cyprus. It is noted that an individual who fulfils all the criteria, but if in the year of the exercise of any business and/or employment in Cyprus and/or holding of position to a table person of Cyprus have ceased, then he/she will not be considered as tax resident of Cyprus in that specific tax year.
New Criteria for Cyprus Residency
- The individual must remain in Cyprus for at least sixty days in the tax year and must not be tax resident in any other state for the same tax year;
- The individual must carry out business in Cyprus and/or be employed in Cyprus and/or be a director in a company which is tax resident in Cyprus during the tax year of consideration;
- The individual must maintain a permanent residence in Cyprus, which can be rented or owned.
The total number of days of stay in Cyprus are calculated as follows:
- The day of departure from Cyprus is considered not considered as a day of stay in Cyprus;
- The day of arrival in Cyprus is considered as one day of stay in Cyprus;
- Arrival in Cyprus and departure from Cyprus on the same day is considered as one day of stay in Cyprus;
- Departure from Cyprus and arrival to Cyprus on the same day is not considered as a day of stay in Cyprus.
It is reminded that Cyprus tax residents are taxed on their worldwide income under Cyprus income tax rates which are as follows:
|TAX BRACKET||TAX RATE %|
|Up to €19,500||0%|
|Between €19,501 – €28,000||20%|
|Between €28,001 – €36,300||25%|
|Between €36,301 – €60,000||30%|
· New Non – Domiciled Rules:
Individuals who are tax resident of Cyprus but are not domiciled in Cyprus are exempt from special defence contribution imposed on dividends, interest and rental income.
· Relief for high paid individuals taking up employment in Cyprus:
50% exemption applies to non-residence individuals taking up residence in Cyprus for an employment in Cyprus with income exceeded €100,000 for a period of 10 years (extended from 5 years to 10 years).
· Relief for non resident individuals taking up employment in Cyprus:
20% exemption of the remuneration with a maximum amount of €8,550 from any office or employment exercised in Cyprus by an individual who was resident outside Cyprus before commencement of employment. The exemption applies for a period of 5 years (extended from 3 years to 5 years).
New Criteria for Companies
Based on the new provisions, and in accordance with the Government’s scheme for the Acquisition of Citizenship by Investment, incentives are now offered to high-paid employees / executives of companies located outside the Republic of Cyprus with the purpose of attracting these companies to transfer their base to Cyprus.
Such International Business Companies will need to show substantial presence which will determine the tax base of the company.
Actions or measures that indicate substantial presence of companies include:
- Who the company’s Directors are, what their business background is, how much time they can dedicate to the running of the company.
- How the Directors make decisions.
- Maintaining bank accounts with the local banks.
By creating sufficient presence in Cyprus, the company minimizes the risk of double taxation if a foreign tax authority seeks to challenge the tax residency of a Cyprus company with the purpose of imposing tax in accordance with its own legislation.
Please contact us for further information or simply if you would like to explore the benefits of Cyprus Tax Residency for your particular situation.