On 14 July 2017 the Cyprus parliament voted for a Cyprus tax law amendment to also provide that an individual can be a Tax Resident of Cyprus even if he/she spends less that 183 days in the Republic.
In particular, as of 1 January 2017 an individual can be considered a Cyprus tax resident if he/she spends 60 days in Cyprus provided that he/she satisfies all of the following conditions within the same tax year (1 January -31 December):
- Does not reside in any other single state for a period exceeding 183 days in aggregate;
- Is not considered a tax resident in any other state;
- reside in Cyprus for at least 60 days in the year of assessment;
- maintains a permanent home in the Republic that is either owned or rented; and
- carries on a business in the Republic, is employed in the Republic or holds an office in a person who is a tax resident of the Republic at any time during the year of assessment.
It is noted that if the employment/business or holding of an office is terminated during the tax year, then the individual ceases to be considered a Cyprus tax resident of the Republic at any time during the tax year.
Individuals who are already considered as Cyprus tax resident under the current “183 day rule” are not impacted by this new amendment. Those individuals who are not considered as Cyprus tax resident under the current “183 day rule” should now assess whether they satisfy the new “60 day rule”. Individuals satisfying the “60 day rule” should then consider what additional steps they need to take. These steps may include, inter alia, registering as a tax resident with the Cyprus Tax Authorities, considering whether the non-domicile rules apply to them and apply for relevant certificate and exemptions, obtaining and maintaining relevant evidence pertaining to a permanent residential property in Cyprus.
An individual who will be considered a Cyprus tax resident either under the “183 days rule” or under the “60 days rule” will be taxed on his/her worldwide income under Cyprus tax. Currently the income tax rates in Cyprus are as follows:
It is worth noting that a person who has never been a tax resident and/or permanent resident in Cyprus for the past 20 years, since he is acquiring tax residency in Cyprus under the applicable law, will enjoy a favourable tax arrangement. In particular, income from interest, and income from dividends from shares, both inside and outside Cyprus, is not subject to taxation.
The following tax incentives also exist for individuals employed in Cyprus who were previously not tax residents:
- Lower of €8.550 or 20% of the remuneration from any office or employments exercised in Cyprus is exempt for a period of 5 years (this incentive will expire in 2020);
- For individuals with employment income exceeding €100.000 per annum, a 50% tax exemption exists which can be enjoyed for a period of 10 years.
Finally, we note that on 29/01/2019 an interpretation circular no. 33 in relation to the 60- days tax residency rule for individuals was issued by the Tax Department in order to specify that in case of an individual who, instead of holding an office for a person tax resident in the Republic and maintain it until the 31st December of each tax year, assigns it to a nominee director, then the condition is deemed not to be met and thus the person could not be considered tax residence of the Republic on the basis of the 60-day rule.
The information set out in this publication provides general guidance and for information purposes only. It does not constitute or substitute professional advice. We shall not be responsible for any loss occasioned by acting or refraining from acting on the basis of this publication.