Tax residency in Cyprus based on the 60-days rule of residence

The Tax Department of Cyprus issued a Circular (1/2022) on the 1st of February 2022, through which it clarifies the tax treatment of the tax residency of a physical person in Cyprus based on the 60-days rule.

1. Reference to the 60-days rule

According to the Income Tax Law in Cyprus, a tax residency in Cyprus may be acquired from a physical person residing in Cyprus for at least 183 days in a calendar year. However, it can also be acquired from a physical person satisfying all the conditions below for a tax year in which they wish to obtain a tax residency in Cyprus:

  1. Stay in Cyprus for one or more periods exceeding 60 days
  2. Do not reside in another state for one or more periods exceeding 183 days
  3. Not being considered as tax residents in another state for the same tax year
  4. Exercising business, being employed or holding an office in a Cyprus tax resident company. In case any of these are terminated before the end of the year-end (the 31st of December), then the tax residency status of the physical person is terminated.
  5. Maintaining a permanent residence in Cyprus that is owned or rented

Note: Permanent residence is defined as an arrangement of the physical person to maintain a permanent residence in Cyprus for permanent use and is available to the person for unlimited time.

Countries with different tax year than that of Cyprus

Based on the Circular, it is highlighted that a person claiming tax residency in Cyprus based on the 60-days rule for a tax year, but at the same time this person is considered as a tax resident in the United Kingdom (U.K.), it is not considered that the condition (iii) above is violated.

Given that the tax year in the U.K. begins from the 6th of April and ends on the 5th of April in the next calendar year, such a case might be that a physical person claiming for a tax residency in Cyprus for a tax year, is also a tax resident in the U.K. This applies for the period that the U.K. tax year ends, i.e., from the 1st of January until the 5th of April, and for the period that the Cyprus tax year begins, i.e., the 1st of January of the same calendar year.

For example, in the case whereby a person is considered a U.K. tax resident from 6th of April 2021 until 5th of April 2022 and claims tax residency in Cyprus based on the 60-days rule for the tax year 2022, the above condition is not violated. That is because the period from 1st of January 2022 until 5th of April 2022 is the period whereby the U.K. tax year ends and the Cyprus tax year begins.

It is highlighted that the above applies for instances where persons are also tax residents in other countries, given that the tax year of those countries differs from that of Cyprus. This is also subject to approval from the Cyprus Tax Commissioner.

Reference to persons that hold offices in Cyprus tax resident companies

According to the Circular, persons holding offices in Cyprus tax resident companies are able to apply for Cyprus tax residency based on the 60-days rule, provided that they personally hold Director positions in Cyprus tax resident companies, based on the register held by the Department of the Registrar of Companies and Intellectual Property. It is also a condition that this position must be maintained until the 31st of December of the same tax year.

2. Payment obligation of Special Contribution for Defence

Persons that are considered as tax residents in Cyprus based on the 60-days rule are also liable to pay Special Contribution for Defence in Cyprus, given that they are also domiciled in Cyprus.

3. Issuance of tax residency certificate

A person who wishes to obtain a certificate for tax residency in Cyprus based on the 60-days rule must apply to the Tax Department by submitting the form T.D. 126 (2022).

It is also feasible to obtain the tax residency certificate before the 60 days pass, provided that the below conditions apply:

  • Relevant supporting evidence are submitted to prove that the person exercises business in Cyprus, is employed in a Cyprus tax resident company or holds an office in a Cyprus tax resident company, but also that this person maintains a permanent residence in Cyprus.
  • Supporting evidence is submitted relevant to forthcoming receipt of income from foreign sources.
  • Documentation of the reasons that the person requires the issuance of the certificate before the 60 days pass.

It is noted that all the supporting documents that are submitted to the Tax Department for the purpose of issuance of the tax residency certificate must also be duly stamped based on the provisions of the relevant legislation. It is also mentioned that for instances where the documents are drafted in a language other than Greek or English, there must be an official translation in place to one of the two languages.

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.