CYPRUS TAX RESIDENCY AT 60 DAYS
The international financial environment has been changing dramatically the last few years, moving towards full transparency ending the era of confidentiality.
We have seen the end of Swiss confidentiality, the beginning of automatic exchange of information and crossborder fiscal cooperation, the introduction by offshore jurisdictions like BVI of central registry of beneficial owners. We experienced the set up of similar publicity accessible registries of beneficial owners/ persons of significant control in UK, Netherlands and shortly all the EU countries will have to implement fully the 4th Directive which also introduces similar clauses.
The question is how do we adjust to the new challenges?
A solution to this is the choice of tax residency in an investment and business friendly environment in full compliance with the new laws and regulations. Cyprus has introduced new legislation that offers the possibility of zero tax environment for non domicile tax residents who live in Cyprus only 60 days per calendar year, as analyzed below.
An amendment to the definition of “Cyprus tax resident individual” as included in the Income Tax Law 118 (I)/2002, was recently voted by the Cyprus Parliament. The amendment is effective from 1 January 2017 and provides for an individual to be considered as a Cyprus tax resident under the 60 days scheme under specific conditions.
More specifically, the details of the amendment are as follows:
An individual will be considered as a Cyprus tax resident if he/she:
- does not spend more than a total of 183 days in any country within a tax year; and
- is not a tax resident of another country within the same tax year
and satisfies the following three conditions:
(a) remains in Cyprus for at least 60 days during the tax year;
(b) carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident company at any time during the tax year; and
(c) maintains a permanent residence in Cyprus (owned or rented).
All of the above conditions need to be satisfied in order for the individual to be considered as a Cyprus tax resident.
It is noted that in case an individual is a tax resident in the Republic, tax is imposed on income accruing or arising from sources all over the world (both within and outside the Republic).
However, individuals who are not considered to be ‘domiciled’ in Cyprus, are exempted from the payment of Special Contribution for Defence Tax on dividends and interest even if they are considered as tax residents of Cyprus.