On Friday, July 14, the Parliament of Cyprus approved a bill 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 will become effective as from 1 January 2017, an individual will be considered as being a Cyprus tax resident provided that he/she satisfied either the "60 day rule" or the "183 day rule".
It is to be noted, that 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. The "60 day rule" intents to attract a significant number of individuals (investors, entrepreneurs, digital nomads, artists, sportsmen and other businessmen) who do not fulfill the tax residency requirements in any country. The absence of an established tax residency status may make them exposed to the tax authorities worldwide.
How to become Cyprus Tax Resident under the amended law based on the 60-day rule?
In order to become a Cyprus tax resident on the basis of the "60 day rule" the concerned individual must meet cumulatively 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 (either owned or rented).
It is to be noted, that even if an individual meets the aforementioned conditions, s/he is not considered a Cyprus tax resident, if his/her business and/or employment in Cyprus and/or position in a Cyprus tax resident have ceased.
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.
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.
- Profit from the sale of securities in 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.
Should be noted that current Cyprus tax residents under the "183 day rule" are not affected by this new amendment.
Individuals who do not qualify as Cyprus tax resident under the "183 day rule" now have the opportunity to consider the "60 day rule" which will apply as from 1 January 2017.
Are you satisfying the "60 day rule", and if so then what's next?
Individuals who can satisfy the "60 day rule" should now consider registering as tax residents of Cyprus and maintain a residential property in Cyprus (rent or buy). Alternatively, for individuals who do not satisfy the aforementioned criteria, and at the same time they are not subject to tax to any state, should consider the possibilities of registering in Cyprus as tax residents under the "60 day rule".
For the Cyprus "non-dom" rules, you can find further information on the non-dom resident status here.