According to the Cyprus legislation, if an individual is physically present in Cyprus for more than 183 days in a tax year (1st January to 31st December), she/he will be considered a tax resident of Cyprus in that tax year. Consequently, if the individual is physically present in Cyprus for less than 183 days in a tax year, she/he will be considered to be a non-Cyprus tax resident in that tax year.
As of 1st January 2017, an individual who does not stay in any other country for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in Cyprus in that tax year, if all of the following conditions are met:
the individual stays in Cyprus for at least 60 days in the tax year;
exercises a business and/or is employed in Cyprus and/or holds an office with a Cyprus tax resident company at any time during the tax year;
maintains (by owning or leasing) a permanent home in Cyprus.
Definition of Non-Domiciled Individual
In accordance with the provisions of the Wills and Succession Law, there are two kinds of domicile:
domicile of origin, i.e. the domicile received at birth (generally dependent on the father’s side); or
domicile of choice, i.e. domicile acquired by establishing physical presence in a particular place and by demonstrating sufficient intention to make it the place of permanent residence.
In the case of individuals who have their domicile of origin in Cyprus, they will nevertheless be considered as non-domiciled in the following cases:
if they have acquired and maintained a domicile of choice outside Cyprus, provided that they were not tax residents in Cyprus for any continuous period of at least 20 consecutive years prior to the tax year in question; or
if they were not tax residents in Cyprus for a period of at least 20 consecutive years immediately prior to the entry into force of the non-domicile provisions (i.e. between the years 1995 and 2014 inclusive).
For tax purposes, non-domiciled individuals who become Cyprus tax residents will now be completely exempt from Special Defence Contribution (“SDC”) tax.
Domiciled tax resident individual
Type of Income
Income Tax
SDC
Dividends
Exempt
Taxable -17%
Interest
Exempt
Taxable -30%
Rental Income
Taxable (Normal rates)
Taxable at 3% on 75% of gross income
Non Domiciled tax resident individual
Type of Income
Income Tax
SDC
Dividends
Exempt
Exempt
Interest
Exempt
Exempt
Rental Income
Taxable (Normal rates)
Exempt
Since 1 March 2019, Dividend income is subject to GeSY contributions, (at the rate of 1.7% from 1 March 2019 until the 29 February 2020, then increased to 2.65% from March 1, 2020), restricted to a maximum of EUR180,000 income annually.
Income Tax Rates for Cyprus tax residents
Chargeable income (EUR)
Tax Rates (%)
0 – 19.500
0
19.501 – 28.000
20
28.001 – 36.300
25
36.301 – 60.000
30
Over 60.000
35
Other Cypriot Tax Advantages for Individuals
No wealth taxes.
No immovable property taxes.
No inheritance and gift taxes.
100% exemption on remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer.
100% exemption on lump sum repayments from life insurance schemes or from approved provident funds.
Capital gains from the sale of immovable property situated outside Cyprus is exempt from tax.
Profit from sale of shares and other qualifying titles is specifically exempt from Cyprus taxation, provided that the underlying assets do not include immovable property located in Cyprus.
First €19,500 of taxable income is tax exempt. Any taxable income in excess of this amount is taxed at progressive rates ranging from 20% to 35% (for incomes over €60,000).
50% exemption for remuneration from employment exercised in Cyprus by individuals who were resident outside Cyprus before commencement of their employment. The exemption applies for 10 years commencing from the year of employment, if such income exceeds €100,000 per year.
In case of Cypriot remuneration, which is less than €100,000, a 20% exemption is granted, up to a maximum of €8,550, for a period of 5 years commencing from the 1st January of the year following the year of employment, and until the year 2020.
In case of Cypriot immovable property acquired up to 31st December 2016, profit from subsequent future disposal of such property will be exempt from the 20% Capital Gains Tax.
Pension received in respect of past employment outside Cyprus is taxed in Cyprus at the flat rate of 5% for amounts in excess of €3,420.
The above is intended to provide a brief guide only. It is essential that appropriate professional advice is obtained. We will be glad to assist you in this respect. Please do not hesitate to contact us.
