Cyprus tax residency
According to the Income Tax Law of 2002, under the “183-day rule”, an individual who spends at least 183 days a year in Cyprus is considered a Cyprus tax resident. On 14 July 2017, the Cyprus parliament voted for a Cyprus tax law amendment adding a second test – the “60-day rule” – for the purposes of determining Cyprus tax residency for individuals.
The “60-day rule” concerns individuals who do not fulfil the tax residency requirements in any country.
How to become a Cyprus tax resident under the 60-day rule?
To become a Cyprus tax resident on the basis of the “60-day rule” the individual must meet all of the following conditions:
- Remain in Cyprus for at least 60 days during the tax year in question; and
- Do not reside in any other single state for a period exceeding 183 days; and
- Is not tax resident in any other state; and
- Carry out business activities in Cyprus and/or work in Cyprus and/or be a director in a Company that is tax resident in Cyprus at any time of the tax year in question; and
- Maintain a permanent residence in Cyprus.
What are the applicable tax benefits?
Individuals who are Cyprus tax residents, whether under the “60-day rule” or under the “183-day rule” are taxed in Cyprus on their worldwide income but certain exceptions apply, as follows:
- A Cyprus tax resident individual but non-domiciled in Cyprus is exempt in Cyprus from taxation on his/her worldwide dividend and ‘passive’ interest income. An individual who does not have a “Domicile of Origin” in Cyprus, is only considered to be domiciled in Cyprus for tax purposes when the individual has been a tax resident of Cyprus for a period of at least 17 years out of the last 20 years prior to the tax year in question.
- Profit from the sale of securities is exempt from tax in Cyprus. ‘Securities’ include, inter alia, shares in local or foreign companies, bonds, debentures, options etc, except in cases where the value of the shares derives from the value of immovable property in Cyprus.
- An individual who is going to be employed in Cyprus and his/her income will exceed €100.000, and, provided that he/she has not been a tax resident of Cyprus prior to the commencement of his/her employment in Cyprus, he/she will enjoy 50% discount on his/her income tax in Cyprus, for a period of 10 years.
- Income from employment carried out outside Cyprus is exempted from Cyprus income tax, provided that the employment exercised outside Cyprus exceeds 90 days per tax year.