60-day rule is applied on obtaining a Cyprus tax residency
On July 14, 2017, the Parliament of Cypriot amended the current legislation on granting tax resident status to foreigners. We should remind that foreign tax residents of Cyprus benefit from the agreements on avoidance of double taxation signed by the state, and they also benefit tax exemptions when receiving dividends, interest and royalties. Until recently, the main condition for obtaining this status was staying on the island for at least 183 days a year. The adopted innovation provides for the possibility for individuals to become a Cyprus tax resident, staying on its territory for only 60 days a year, while observing a number of conditions.
So, in order to obtain a Cyprus tax residency under the 60-day rule, which took effect on January 1, 2017, you must:
- remain in Cyprus for at least 60 days during the tax year in question;
- not reside in any other single state for a period or periods exceeding 183 days;
- not be tax resident in any other state;
- carry out business activities, work in Cyprus or be a director of a company that is tax resident in Cyprus at any time during the tax year in question (at the same time, if a person ceases to conduct business or employment during the tax year, the residence is lost);
- maintain a permanent residence in Cyprus (either owned or rented).
The period of stay on the island is calculated as follows:
- the day of departure from Cyprus is considered a day outside of it;
- the day of arrival in Cyprus is considered a day in its territory;
- arrival and departure within the same day is considered one day on the island;
- departure and return within the same day is considered one day outside Cyprus.
Tax residents of Cyprus, regardless of the rule applied (the 60-day or 183-day rule), are taxed in Cyprus and can enjoy a number of tax benefits:
- An individual - a Cyprus tax resident who does not reside in the country - is exempt in Cyprus from taxation on his or her worldwide dividend and 'passive' interest income.
- Profit from the sale of securities (shares in local and foreign companies, bonds, options, etc.) is exempt from tax in Cyprus, except in cases where the value of the shares derives from the value of immovable property in Cyprus.
- An individual who is employed in Cyprus and whose income exceeds €100,000 will enjoy a 50% discount on his or her income tax in Cyprus for 10 years provided that he or she has not been a tax resident of Cyprus before the commencement of his or her employment in Cyprus.
- Income from employment undertaken outside Cyprus is not subject to income tax in Cyprus, provided that the employment undertaken outside the state exceeds 90 days per tax year.
The innovation in the form of the 60-day rule is aimed at attracting a significant number of investors, entrepreneurs, sportspeople and artists who do not meet the requirements of tax residency in other jurisdictions.