ARTICLE
28 March 2024

The Advantages Of Becoming A Tax Resident In Cyprus

MK
Michael Kyprianou Law Firm

Contributor

The firm, based in Cyprus, has an international presence. Its services include Dispute Resolution, Property, Shipping, Immigration, Commercial and Corporate Law. It is highly ranked by leading legal directories, including Legal500 and Chambers and regularly receives accolades from the Cyprus Government and international bodies, in recognition of its excellent service and commitment to the values of integrity, efficiency and professionalism.
In this article, Savvas Savvides answers some frequently asked questions about the issue of tax residence in Cyprus.
Cyprus Tax
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The advantages of becoming a tax resident in Cyprus

In this article, Savvas Savvides answers some frequently asked questions about the issue of tax residence in Cyprus.

Why would someone want to become a tax resident of Cyprus?

Cyprus' low tax rates attract many foreign businessmen who want to take advantage of the island's privileged business and tax environment.

With a low cost of living and corporate tax rates, including other advantages, Cyprus is recognised as being one of the best countries in the EU for relocation.

You can be considered a Cyprus tax resident under the non-domiciled rule if you were not born in Cyprus or have not resided in Cyprus for the past 17 years.

As a non-domiciled person, you can benefit from the transfer of tax residence to Cyprus due to the attractive business and tax environment of the island.

We know that until now, in order to become a tax resident in Cyprus, one had to be resident in Cyprus for at least 183 days. Has anything changed in this?

There are two ways for a person to be considered as Cyprus tax resident. The one is to reside in Cyprus for more than 183 days in a calendar year. The second way, is the 60-day regulation, where one can be considered a Cyprus tax resident if meets the criteria of either the 60-day or the 183-day regulation.

The 60-day residency regulation is aimed at attracting a significant number of people (eg. investors, businessmen, artists, athletes, foreign workers) who do not qualify for tax residency anywhere else.

What are the criteria of the new 60-day regulation?

In order to become a tax resident of Cyprus with 60 days of residence, you must meet the following criteria:

  • Stay in Cyprus for at least 60 days during the tax year,
  • Not stay in any other country for a period of more than 183 days,
  • Not be a tax resident of any other country,
  • Carry out business activities in Cyprus and/or work in Cyprus and/or be a director of a company with tax residence in Cyprus,
  • Maintain a permanent residence (home) in Cyprus (either owned or rented).

Can you acquire tax residence in Cyprus through the establishment of a Cyprus company?

One of the most common ways to obtain tax residence in Cyprus is through the registration of a Cyprus company which will employ you.

Through the establishment of a Cyprus company, foreigners will be able to obtain a work permit and a certificate of tax residence in Cyprus from the authorities, as non-domiciled. This option allows expatriate shareholders and employees of the company to apply for a Cyprus tax identity card.

Establishing a Cyprus company has many tax and business advantages.

What are the benefits of having a Cyprus company?

Cyprus companies enjoy a low corporate tax rate of 12.5%, can have 100% foreign ownership, no trading restrictions, repatriation of profits at no cost, and an extensive network of treaties that exempt from double taxation. Also, for the shareholders of the Cyprus companies who receive dividend income, their dividend income is exempt from personal income tax. Dividend income is only subject to GESY (2.65%) and Special Defence (17%) – for domiciled tax residents.

What other tax characteristics does Cyprus have?

Cyprus has one of the lowest VAT rates in Europe at 19%. There are also reduced VAT rates of 9% and 5% and a zero VAT rate on certain goods and services.

Non-domiciled tax residents are exempt from Special Defence Contributions for 17 years, from the date of being eligible to non-dom. This allows them exemption from Special Defence which is 17% on Dividend income, 2.25% on Rental income and 30% on Passive interest income.

Employers and employees contribute 8.8% of their earnings (with maximum annual earnings of €62,868) to the Social Insurance Fund. The employer also pays an additional 3.7% contribution on top of the employees' earnings.

Also, tax residents contribute to the General Health Care System (GESY) based on the income received. The contribution is at 2.65% on earnings (capped on €180,000 earnings).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
28 March 2024

The Advantages Of Becoming A Tax Resident In Cyprus

Cyprus Tax

Contributor

The firm, based in Cyprus, has an international presence. Its services include Dispute Resolution, Property, Shipping, Immigration, Commercial and Corporate Law. It is highly ranked by leading legal directories, including Legal500 and Chambers and regularly receives accolades from the Cyprus Government and international bodies, in recognition of its excellent service and commitment to the values of integrity, efficiency and professionalism.
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