HOW TO OBTAIN CYPRUS TAX RESIDENT STATUS?
In order to acquire the status of a tax resident of Cyprus, there are two options:
The first option has existed for a long time - a natural person should live in the country for at least 183 days a year. At the same time, it does not matter either the reason for which an individual is in Cyprus, or in which apartment he lives (own or rented).
The second option was approved in 2017. It provides an opportunity to obtain tax residency for an individual who stays in Cyprus for at least 60 days a year.
REQUIREMENTS FOR OBTAINING RESIDENCE OF CYPRUS
For this, it is necessary to fulfill all the requirements listed below:
- Do not have the status of a tax resident of another state.
- Not to reside in another jurisdiction for more than 183 days in a year (in one or more periods of time).
- Conduct business and/or officially work in Cyprus and/or act as a director of a company with the status of tax resident of Cyprus.
- Have your own or rented accommodation in Cyprus.
A natural person who is:
- a tax resident of Cyprus - tax must be paid on all their worldwide income (tax exemptions and deductions can be used)
- a non-tax resident of Cyprus - only that part of the earnings, which originates in Cyprus (dividends and interest are exempt from Cypriot taxes), is subject to income tax.
Individuals - tax residents of Cyprus without a domicile for at least 17 years can use the following tax discounts and deductions (until they receive a domicile):
- 0% tax on dividends and tax on interest received from any sources around the world (at the same time, foreign dividends and interest may be taxed in the country of their payment)
- the rule "on imputed distribution" does not apply to the share of the beneficiary's share capital (it is necessary to declare at least 70% of the company's profit as dividends within 2 years).
Income tax rate:
- 0% for income up to 19,500 euros
- from 20% to 35% for income over 19,500 euros (the maximum rate of 35% applies to income over 60,000 euros).
Exemptions and deductions that apply to the earnings of individuals employed in Cyprus:
- 20% of income is exempt from taxation, but not more than 8,550 euros per hour. The exception applies from the following year after employment, up to and including 2020 and for no more than 5 years.
- an individual – a non-tax resident of Cyprus, employed by a Cypriot company and receiving an annual income of more than 100,000 euros, uses a 50% tax discount. The benefit is applied from the first year of work and for 10 years. The main condition is that the annual salary of 100,000 euros has been fixed at the beginning of work in Cyprus, otherwise it will be perceived as a special action to obtain tax exemption.
If an individual was a Cypriot tax resident prior to employment in Cyprus (either in the previous year before starting work, or during 3 years out of the previous 5 years before starting work), exemptions are not used. The rule is applicable only to those individuals who started working in Cyprus on January 1, 2015.
An individual can use only one option of tax exemption at a time - 20% or 50%.
An individual who is a tax resident of Cyprus, when receiving income for services provided abroad (to companies that are non-tax residents of Cyprus or to international representatives of firms that are tax residents of Cyprus) does not pay income tax. The rule applies to services that are provided for at least 90 days a year and if there is a mutually related "employer-employee".
Proceeds from the sale of securities, shares, bonds and other equity financial instruments, proceeds from the repurchase or redemption of shares in funds, proceeds from the sale of real estate located outside Cyprus (including capital gains tax) are also exempt from income tax. At the same time, foreign real estate may be taxed in the country where it is located.
DOMICILE OF CYPRUS
The term domicile is closely related to the term of tax residency - the place of continuous residence of an individual.
In Cyprus, domicile can be obtained at birth (domicile by birth) or upon application (domicile by choice).
A natural person who received domicile at birth can lose his status if he is a tax resident of another state for 20 years.
To obtain a domicile of choice, an individual must, for example, arrange housing in Cyprus and live in it either all the time or for some indefinite period. Not having a domicile, but with a Cypriot tax residency of at least 17 out of 20 years, an individual also acquires a status equal to a person with a domicile.
If you need to obtain tax residency in Cyprus, contact our specialists for advice:
+38 (098) 737-88-88
We will help you become a tax resident of Cyprus with all tax privileges.