According to the Cyprus legislation, an individual who spends more than 183 days in Cyprus territory, is considered a Cyprus Tax resident. As from the tax year 2017 the new 60 days rule can be additionally applied for individuals.
183 days Tax Resident rule.
A Cyprus Tax resident is taxed on his local and international income under the Cyprus tax regime. The individual has then the opportunity to be taxed on his worldwide income and avoid double taxation.
The 60 days Tax Resident rule.
This rule came in 2017 as an amendment to the “183 days” rule and provides incentives to high profile individuals, professionals and executives to become Cyprus Tax residents.
The 60 days rule is effective as from the tax year 2017.
How does the “60 days” rule applies?
An individual who in the relevant tax year:
a. does not reside in any other country for a time period of more than 183 days(aggregate) and
b. is not a tax resident in any other country and
c. resides in Cyprus for at least 60 days and
d. has ties with Cyprus such as :
- contract of employment
- he is a business owner
- he is a director of a Cyprus Tax resident company.
The above must take place in a tax year and are not considered valid in case of termination of employment during the tax year.
In addition, the individual must maintain a residential property during the tax year either owned or rented.
Advantages of Cyprus Tax residents.
Income exemption for employment in Cyprus.
An individual with annual remuneration of more than €55.000 and who was not a tax residence in Cyprus before the employment, is entitled for 50% tax deduction on his income. This deduction refers to income deriving from Cyprus and the rule is valid for a period of 17 years starting on the day of his employment.
Non-Domicile status in Cyprus
Foreigners who decide to move their personal tax residency in Cyprus, can apply to acquire the Non-Domicile status in Cyprus for a maximum of 17 years. Non-domicile Cyprus tax residents are completely exempt from Special Defense Contribution tax (“SDC”). SDC applies on dividends , rental income and interest. As SDC tax does not apply in the case of Cyprus tax resident individuals who are non-domiciled in Cyprus, dividend and interest earned by such persons will only be taxed in Cyprus with the General Health System Tax at 2.65%.
Profit arising for the sale of securities that include shares, bonds, debentures and others is exempted from taxation in Cyprus. Please note that in the cases where the shares value comes from real estate in Cyprus the above rule is not applied.
Employment Income Exemption
50% of remuneration from employment in Cyprus is exempted from income tax for the first 17 years. This rule applies for individuals that were not tax residents before the commencement of the employment and provided that the annual remuneration exceeds €100.000.
Exemptions on income from employment out of Cyprus
An individual who is employed outside of Cyprus – to a foreign permanent establishment of a Cyprus tax resident employer for more than 90 days aggregate in a tax year, is exempted from income tax.
How the 60 days count
For both 60 and 183 days rules, the days count in and out of Cyprus territory are the below.
- The day of departure from Cyprus counts as a day of residence outside Cyprus.
- The day of arrival in Cyprus counts as a day of residence.
- Same day arrival and departure from Cyprus counts as a day of residence in Cyprus.
Here you can download the full guide for Cyprus Tax Residence in 60 Days.