New Residency Rules in Cyprus

CYPRUS TAX LAW AMENDMENT 

On 14th of July 2016, the Parliament of Cyprus amended a Cyprus Tax Law granting tax resident status to individuals that spend at least 60 days in Cyprus per year, under certain conditions.

Under the "60 day rule", which is effective as from 1 January 2017, an individual will be considered as a tax resident of Cyprus if the individual satisfies either the already existing “183 day rule” or the new ”60 day rule” for the tax year. 

The "60 day rule" intents to attract a significant number of individuals who do not fulfill the tax residency requirements in any country, since the absence of an established tax residency status may make them exposed to the tax authorities worldwide.

The main aim of the new law is to allow an individual who does not remain in any other state for one or more periods, which do not exceed 183 days in total, within the same year of assessment and who is not tax resident in any other state for the same year of assessment, to be considered as a resident of Republic of Cyprus.

According to the new rule, the individual will be considered as tax resident to Cyprus, if he/she satisfies cumulatively the following four criteria:
  • Stays in Cyprus for at least 60 days in a calendar year
  • Do not reside in any other single state for a period exceeding 183 days
  • Carries on any business in Cyprus and/or is employed in Cyprus and/or holds an office (director) in a company tax resident in Cyprus at any time in the tax year. 
  • Maintains a permanent house in Cyprus which is either owned or rented by the individual. 

How to calculate the days of residency in Cyprus?
  • The day of departure from Cyprus is considered as a day outside of Cyprus;
  • The day of arrival in Cyprus is considered as a day in Cyprus;
  • Arrival in Cyprus and departure from Cyprus within the same day is considered as one day in Cyprus;
  • Departure from Cyprus and return to Cyprus within the same day is considered as one day outside of Cyprus.

Individuals who may want to claim Cyprus residence under this rule should be aware that the residency rules differ from country to country and the 183 day rule is not universal. In case of double residency situation, the individual has additional considerations:
  • The center of vital interests,
  • Habitual adobe,
  • Nationality 
  • Mutual agreement procedure
For an individual who is considered as a Cyprus tax resident, will be taxed on their worldwide income under Cyprus tax. Currently the income tax rates in Cyprus are as follows:

 Tax Base (EUR)  Tax Rate (%)
 Up to €19,500 0% 
 €19,501 to €28,000 20% 
 €28,001 to €36,300 25% 
 €36,301 to €60,000 30% 
 Over €60,000  35%


Note that, individuals who are tax residents in Cyprus but are not domiciled in Cyprus will be exempt from special defense contribution which is levied on dividends, interest and rental income.

Moreover, for individuals who are employed in Cyprus but weren’t previously tax residents, with employment income lower than €8,550 or 20% of the remuneration from any office or employments exercised in Cyprus are exempt for a period of 5 years –incentive expires 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. 
 

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