Becoming a resident of a country with favourable tax arrangements makes perfect sense for a variety of people, particularly those in business and with high incomes. Taking out tax resident status is a popular option, providing much flexibility as taxes are determined for each year in isolation, depending on where the person resides during that year. In a double-taxation treaty, two countries where someone lives or has their business co-operate over taxation to avoid the person being taxed twice.
Cyprus is a popular destination for tax residency, offering an attractive business environment, low income tax for individuals and companies, and flexibility of rules for becoming a tax resident.
Tax Residency Criteria in Cyprus
The 183 Day Rule
Historically there has been a rule for tax residency in Cyprus if a person stays in Cyprus for more than 183 days per year, they are considered to be a resident for tax purposes.
People from other countries who become citizens of Cyprus generally qualify under this 183 rule.
The 60 Day Rule
A new law came into effect in July 2017 whereby individuals who stay in Cyprus for more than 60 days in a year are considered to be tax residents providing certain other conditions apply:
- They are not a tax resident of another country
- They do not reside for 183 days or more in another country
- They can prove that they have further economic ties to Cyprus, for example by owning or renting a permanent residence on the island
- They carry out work or business activities in Cyprus or act as Director of a Cypriot tax resident company during the year being taxed
Benefits of Tax Resident Status in Cyprus
Cyprus offers low income-tax rates, low social insurance contributions and favourable corporation tax rates. Whether under the 60 day or 183 day rule, tax residents have the benefit of a non-domiciled tax scheme, which gives them exemption from tax on any passive income and on income derived from overseas dividends. In addition (and subject to certain exceptions relating to the sale of immovable property in Cyprus) tax residents are exempt from tax on any income deriving from the sale of shares, bonds, debentures and options.
Cyprus tax residents who subsequently take employment in another country and are earning over 100,000 Euro can still benefit from a 50% discount on income tax provided they were not a tax resident of Cyprus before their employment in Cyprus.
The country has a low 12.5% rate of corporation tax, making it one of the lowest rates in the EU.
Cyprus has an extensive double-taxation treaty network with many other countries, offering security and peace of mind in ensuring that the resident is not taxed twice.
In addition to favourable tax arrangements, Cyprus remains a popular option for additional citizenship owing to its good climate, its strong position within the EU leading to a stable economy, low cost of living and high standard of lifestyle, its high quality legal system based on British law, its reputable education and healthcare systems, its high level professional services industries and the convenience of having English widely spoken. Its location, being at the junction of three continents – Europe, Asia and Africa offers convenience and flexibility of travel around the world.
What Are The Tax Arrangements in Cyprus?
Currently, corporation tax rates stand at an advantageous rate of 12.5%, one of the lowest rates in the EU.
There is free profit repatriation, no exchange restrictions and 100% foreign ownership.
Income tax is not payable on the first 19,500 Euros earned. From 19,501 to 28,000 Euros, the income tax rate is 20%. From 28,000 Euros to 36,300 Euros the rate is 25%. From 36,301 Euros to 60,000 Euros the rate is 30%, and from 60,001 Euros the rate is 35%.
It is clear that Cyprus is one of the best countries in the EU to be a tax resident, offering flexibility and advantageous tax arrangements, leading it to be an attractive and strongly popular choice for those wishing to take out a second residency.
Cyprus Residency by Investment Program enables foreign investors to obtain a Cypriot permanent residence permit in just 6 months through a property purchase from €300,000. Contact us for the details of the Program.