Cyprus Tax Law: Amendment to the definition of tax resident for individuals
1 Introduction
1.1 In July 2017 the Cyprus Parliament voted for an amendment to the definition of “resident of the Republic” for individuals as such term is defined in Cyprus Income Tax Law. The amendment has a retrospective effect and is effective as of 1 January 2017.
1.2 This change is introducing a new, second test for establishing an individual’s tax residency in Cyprus. Previously, the only condition that an individual had to satisfy in order to be deemed as a tax resident, was the requirement of physical presence in Cyprus for an aggregate period of 183 days or more during a tax year. Following the amendment, a new ‘60 day rule’ is introduced which allows individuals who satisfy the below criteria to be considered ‘residents of the Republic’.
2 Criteria
2.1 Under the new, additional rule an individual can also acquire tax residency in Cyprus if he/she meets all of the following criteria:
2.1.1 physical presence in Cyprus for at least 60 days in the tax year;
2.1.2 no established tax residency in any other jurisdiction in the same tax year;
2.1.3 no physical presence in any other country for more than 183 aggregate days in the tax year;
2.1.4 maintain a permanent home in Cyprus either rented or owned; and
2.1.5 operates any business in Cyprus and/or exercises remunerated employment in Cyprus as an employee and/or holds an office in Cyprus as a director of a company registered in Cyprus during the relevant tax year (if the employment/holding of office/business ceases during the same tax year then the individual may lose the tax residency status under the new regime).
2.2 It is worth noting that the new ‘60 day rule’ does not affect any individuals who are already tax residents in Cyprus under the existing ‘183 day rule’.
3 Incentives and Benefits
3.1 There are a number of incentives that individuals who acquire tax residency in Cyprus may benefit from and the new ‘60 day’ rule makes this more achievable:
3.1.1 utilisation of the ‘non-domicile rules’ (see our other relevant publications) which results in total exemption on worldwide rental income, passive interest income and dividends income;
3.1.2 100% exemption for employment income from working abroad (subject to conditions);
3.1.3 50% income tax relief for a period of 10 years for employment in Cyprus (subject to conditions);
3.1.4 no estate duty, wealth tax, inheritance tax or gift taxes;
3.1.5 no capital gains tax from the sale of immovable property abroad or in Cyprus (as long as property in Cyprus was acquired between 16/07/2015 and 31/12/2016; and
3.1.6 100% exemption on the entire amount gained from the disposal of titles such as a shares, bonds, debentures, futures, options and others.
Key Contacts
For further information, please contact:
Pavlos Kaimakliotis
Partner
Tel: +357 24 01 01 01
pavlos.kaimakliotis@kaimakliotis.com