Under the “60 day rule”, which is effective as from 1 January 2017, an individual will be considered as being a Cyprus tax resident provided that the individual satisfies either the “60 day rule” or the “183 day rule”.
The 60 days rule An individual who does not stay in any other country, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, may be deemed as a resident of Cyprus in that tax year, by only staying in Cyprus for 60 days.
The 183 days rule Cyprus has adopted a residency-based system of taxation, whereby physical presence in Cyprus exceeding 183 days in a tax year (1st January to 31st December) will constitute tax residency for individuals.
What are the conditions to become a Cyprus Tax Resident under the amended law based on the 60-day rule?
- Remain in Cyprus for at least 60 days during the tax year in question.
- Do not reside in any other single state for a period exceeding 183 days.
- Is not tax resident in any other state.
- 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.
- Maintain a permanent residence in Cyprus (either owned or rented).
Advantages of obtaining Tax residency in Cyprus
It is actually beneficial to be resident in Cyprus compared to many other countries, as the tax regime provides many advantages:
- Cyprus tax residents are liable to income tax on their worldwide income, but the first €19,500 is tax free.
- Interest and dividends are liable to “defence contribution” instead of income tax, but non-Cyprus domiciles are exempt.
- You can choose whether your foreign pension income is taxed at the income tax rates or a flat 5% rate (with the first €3,420 tax-free).
- There is no capital gains tax on the sale of shares. When it comes to property, only real estate in Cyprus is taxable.
- There is no inheritance tax in Cyprus.
McMillan Woods Cyprus Ltd
36 Pireos Street, 3rd Floor, 2023, Strovolos Nicosia, Cyprus
T: +357 22276000 | F: +357 22270807