Changing the definition of Tax Resident in Cyprus: The classification of “Cyprus Tax Resident Individual”, as per the Income Tax Law, has been amended by a recent decision of the House of Representatives on the 14th of July 2017.
Specifically, from the 1st of January 2017, the long-prevailing 183-day rule is now replaced by the below cumulative criteria and conditions and therefore any individual is now considered as a Cyprus tax resident if:
- does not spend more than a total of 183 days in any other State within a tax year; and
- who is not a tax resident in any other State during that very tax year
and at the same time fulfils all the below:
- remains in Cyprus for at least 60 days in the in the year of assessment;
- carries out any business in Cyprus and/or is employed in Cyprus and/or holds an office to a person resident in Cyprus at any time during the tax year; and
- maintains a permanent home in Cyprus that is either owned or rented
Important Note: If the second condition above, namely the employment/business or holding of an office, at any point during that tax year, is terminated- then the individual ceases to be considered as a Cyprus tax resident.
Kindly be informed that an individual who is employed in Cyprus with earnings reaching and excessing the amount of €100,000 per annum, can enjoy a 50% tax exemption for the period of 10 years. Moreover, individuals who are Cyprus tax residents but are not domiciled in Cyprus will be exempt from special-defence contribution which is levied on dividends, interest, and rental income.
Find below the current income tax rates in Cyprus :
|Tax Base (EUR)||Tax rate (%)|
|Up to €19.500||0%|
|€19.501 to €28.000||20%|
|€28.001 to €36.300||25%|
|€36.301 to €60.000||30%|
The above falls under the Government’s efforts of creating attractive tax incentives for foreign investors in order to transfer their tax residence to Cyprus and to be taxed only to income from the activities exercised in Cyprus. Along the same lines, lies another incentive (which however is temporary and expires in 2020) according to which when lower of €8.550 or 20% of the remuneration from any office or employments exercised in Cyprus, will be exempted for a period of 5 years.