Cyprus Non-Domiciled Tax Residency

It's always possible to improve your quality of life, and Cyprus offers all the qualities needed for a desirable relocation. With an idyllic lifestyle, rich culture, 340 days of sunshine per year, and a strategic position in the Eastern Mediterranean, Cyprus combines a high standard of living with a low cost of living in a modern and efficient environment.

Understanding Cyprus Tax Residency Rules

Before 2017, an individual was considered a tax resident of Cyprus only if they were physically present for more than 183 days in a tax year. This is known as the "183-day rule". However, as of 1 January 2017, amendments to the Income Tax Law (ITL) introduced an alternative way to achieve tax residency. An individual physically present in Cyprus for over 60 days in the tax year can elect to be a tax resident under the "60-day rule" if certain conditions are met.

Criteria for the 60-Day Rule

The ''60-day rule'' for Cyprus tax residency is met if the individual, cumulatively, does not reside in any other single state for more than 183 days in the tax year and is not considered a tax resident by any other state. Additionally, they must reside in Cyprus for at least 60 days and have defined ties to Cyprus, which include:

  • Conducting business, being employed, or holding a directorial position in a company tax-resident in Cyprus at any time in the tax year, provided the arrangement is not terminated during that year.
  • Owning or renting a permanent residential property in Cyprus during the tax year.

Benefits of Non-Domiciled Tax Residency in Cyprus

Individuals who are tax residents of Cyprus under either the "183-day rule" or the "60-day rule" can enjoy a variety of benefits:

  • EU Stability: Benefit from the stability provided by full EU membership.
  • Healthcare: Access to first-class healthcare services.
  • No Major Taxes: No inheritance, gift, or wealth tax.
  • SDC Exemptions: Exemption from Special Defence Contributions (SDC) on worldwide dividends, interest, and rental income for 17 out of 20 years.
  • Capital Gains Tax: This tax is imposed only on the sale of immovable property located in Cyprus and shares in which the underlying asset is immovable property situated in Cyprus.
  • Tax Regime for Foreign Pension: There is a special tax regime for foreign pension income. Up to €3,420 annually is exempt, and above that threshold, it is taxed at only 5%.
  • 50% Exemption Rule: Those with an annual income over €100,000, exempting half of their income from tax for ten years.

In summary, the Non-Domiciled Tax Residency status in Cyprus offers more extensive benefits compared to other popular regimes like the Non-Habitual Resident (NHR) status, and for a longer duration of seventeen years.

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