Cyprus 60 Day Tax Residence
Cyprus 60 Day Residence: Pay Zero Tax on dividends and interest earned world wide. As part of the overall effort to continuously improve and simplify the Cyprus tax system. Also to remain a highly compliant and attractive jurisdiction Cyprus has recently passed various new laws.
Among these, is the introduction of the concept of Non-Domiciled status of the Cyprus 60 Day Residence, for individuals for tax purposes. The main aim of introducing the Non-Domicile concept is to constitute Cyprus a prime choice of tax destination. Mainly for persons (both EU and non-EU) who wish to move their personal tax residency away from their country of origin. Such a Concept is the Cyprus 60 Day Residence.
The non-domiciled concept of Cyprus 60 Day Residence, offers significant tax advantages.
If you are interested also for a work permit in Cyprus so that you may exercise your trade or business our Firm can assist you on that too. For more reading please follow the link Cyprus Work Permit.
The Effect of the Cyprus 60 Day Residence.
EU or third country citizens can move their personal tax residence in Cyprus. They will automatically be considered as non-domiciled in Cyprus for a maximum of 17 years.
Non-domiciled persons who become Cyprus tax residents will be exempt from Special Defense Contribution tax (“S.D.C.”) which is 17% on dividends and 30% on interest. S.D.C. generally applies on dividends and interest earned. It is underlined that the main target is the income of `high net worth businessmen` of dividends and interests earned.
So regardless of domicility, foreign investors taking the Cyprus 60 Day Residence enjoy many other tax advantages; with the main ones being outlined below.
You may combine if you like your Cyprus 60 Day Residence with the registration of a Cyprus company. That way you can operate your trading and business and save a lot of corporate taxes. For more details see Cyprus Company Registration.
Cyprus Tax Residence
Cyprus tax residence for individuals is determined by the number of days spent on the island. Cyprus tax residents will pay tax on their worldwide income. You can get credit on foreign tax suffered against the Cyprus tax resulting from the same income.
Definition Of Non-Domiciled Persons
In accordance with the provisions of the Wills and Succession Law, there are two kinds of domicile:
- a) Domicile Of origin; i.e. the domicile received at birth,
- b)Domicile of choice; i.e. by choosing to reside in a particular country.
Individuals who have been tax resident in Cyprus for 17 years, will be deemed to be domiciled in Cyprus.
Persons who have their domicile of origin in Cyprus, will be considered as non-domiciled:
- If you acquire and maintain a domicile of choice outside of Cyprus. Provided that you are not tax resident in Cyprus for any continuous period of at least 20 consecutive years; or
- Provided that you were not tax resident in Cyprus for a period of at least 20 consecutive years;
Tax Benefits Of Non-Domiciled Persons
As per the provisions of the Cyprus S.D.C. Law, dividends and bank deposit interest you earn if you are tax resident in Cyprus are subject to S.D.C. tax. Such tax is at the rate of 17% and 30% respectively. This is regardless if the source of the income is Cyprus or from abroad.
S.D.C. tax applies only for individuals who are both Cyprus tax resident and domiciled in Cyprus.Therefore non-domiciled tax residents will have dividend and interest completely tax exempt in Cyprus.
Other Cyprus Tax Advantages For Individuals
- Dividends and interest are exempt from Cyprus income tax and subject only to S.D.C. in the case of domiciled tax residents.
- Profit from sale of shares and other qualifying titles is specifically exempt from Cyprus taxation;
- First €19,500 of taxable income is tax exempt. Any taxable income in excess of this amount is taxed at scaling rates ranging from 20% to 35%.
- 50% exemption for remuneration from employment exercised in Cyprus by persons who were resident outside Cyprus before commencement of their employment. The exemption applies for 10 years commencing from the year of employment; if such income exceeds €100,000 per year.
- In case of Cyprus remuneration which is less than €100,000, a 20% exemption is granted; up to a maximum of €8,550, for a period of 5 years commencing from the 1st January of the year following the year of employment, and until year 2020.
- Zero tax on remuneration for salaried services; rendered outside Cyprus for more than 90 days in a tax year; to a non-Cyprus resident employer.
Cyprus 60 Day Residence: More Tax Benefits:
- For Cyprus immovable property acquired up to 31st December 2016; profit from subsequent future disposal of such property will be exempt from the 20% Capital Gains Tax.
- Pension received in respect of past employment outside Cyprus is taxed in Cyprus at the flat rate of 5% for amounts in excess of €3,420.
- 100% exemption on lump sum repayments from life insurance schemes or from approved provident funds.
- Capital Gains Tax exemption on the sale of immovable property located outside Cyprus.
- No inheritance tax, no wealth tax, no gift taxation.
- For beneficiaries to a Trust, such individuals would be exempt from tax in Cyprus; to the extent that the income at / from the Trust would be in the form of interest or dividends.
The tax benefits offered to non-domiciled persons who choose to become Cyprus tax residents as well as the other mentioned Cyprus tax advantages provide ample room for tax planning. Such planning is strongly recommended to be performed prior to the foreign person becoming a Cyprus tax resident.
In case of individuals who are directors or senior management in Cypriot entities, the relocation of such individuals to Cyprus could significantly enhance the much needed corporate business substance as it would reinforce its effective Cyprus management and control.
Furthermore, each person who considers moving his personal tax residency to another country (in this case to Cyprus) should separately ensure that, depending on the laws and practices of his current tax jurisdiction, he shall stop being a tax resident in that other country.
In case where an individual domiciled in Cyprus transfers assets to an individual non-domiciled in Cyprus who is a relative up to the third degree, and the Commissioner considers that one of the main reasons for the transfer was to avoid the payment of defense tax, then the income arising from such assets will be subject to defense tax; it can be collected either from the transferor or from the transferee.
By a recent legislation you can become a Tax Resident in Cyprus in 60 days. You must:
- Have a residence in Cyprus either rented or bought.
- Spend 60 days in Cyprus every year.
- Not spend more than 183 days in any other country. A declaration that you do not would be enough if no easy proof that you don’t exists!
- Not be Tax Resident in any other country. Again a declaration to that extent should suffice, If there is no proof that you are!
- Either be employed in Cyprus by an employer of be the Beneficial Owner of a Cyprus company. He can of course be a sole trader.
The above is intended to provide a brief guide only. It is essential that appropriate professional advice is obtained. We will be glad to assist you in this respect. Please do not hesitate to Contact us.