Cyprus has a favourable tax system and clear legislation, which contributes to the country's position as a competitive international financial centre. Today we will be looking at the specifics of Cyprus Tax Residency.
Tax residents in Cyprus are taxed on income earned or derived both within and outside the country.
Up until 2017, people had to live in Cyprus for more than 183 days in a calendar year to be considered as the country’s tax residents. However, in 2017 Cyprus implemented the 60-day rule for getting Cyprus tax residency. The 60-day rule is intended to attract a considerable number of people from different occupational backgrounds who are not tax residents elsewhere and have Cyprus as their base of economic activity to be eligible for the Cyprus tax system benefits.
To be eligible to become a Cyprus tax resident, one needs to meet the following criteria (all of which apply to both the 60 and 183-day rule):
Be present in Cyprus for at least 60 days within one year
Have a permanent residence in Cyprus (either owned or rented)
Does not have other tax obligations (i.e.: tax payer) in other country
Does not spend more than 183 days physically in another country
Does business and/or works in Cyprus with a tax residency in Cyprus until the end of the fiscal year (i.e. 31 December)
Note: The tax residency is determined by the number of days spent physically in Cyprus, and individuals must submit a number of documents before they get their tax residency certificate. Tax Residency Certificate for Individuals In order for individuals to obtain their Tax Residency Certificate, they must submit a number of documents including: title deeds or rental agreements for a property in Cyprus, utility bills, passports, bank records, etc.
Tax residency for Legal Entities Furthermore, a Company can be also considered as a “Tax Resident” in Cyprus when its management and control are operated in the country.
There are numerous tax and financial advantages to establishing a company in Cyprus, including a low corporate tax rate of 12.5% , no transaction limits and a wide range of double tax exemption conditions.
A company is eligible as a Cyprus tax resident when the following criteria are met:
All strategic (and preferably day-to-day) management decisions are taken in Cyprus by directors exercising their duties from Cyprus
The majority of the directors are Cypriot tax residents
An actual office is maintained in Cyprus
Hard copies of commercial documentation is kept in Cyprus
Accounting records are kept in Cyprus
Bank accounts are operated from Cyprus
Tax Residency Certificate for Legal Entities
In order for legal entities to claim the tax residency certificate, a questionnaire needs to be completed. This questionnaire addresses questions regarding the composition of the Board of Directors, the location of shareholder meetings, granting of general Powers of Attorney, the location of bookkeeping and record keeping and more.
Last but not least, all annual business tax returns must be up to date in order for a tax residency certificate to be issued. If you are interested in Cyprus Tax Residency or becoming a tax resident in Cyprus, do not hesitate to contact the ELSAVCO team on 22 811 900 or visit our website to see other services we can offer. We focus on working with you in order to assist you in business development and entrepreneurial growth.