On 14th July 2017, the House of Representatives voted into law the revised criteria for determining the tax residency of individuals in Cyprus.
Specifically, a second test is added in addition to the 183 day rule for individuals who do not spend more than 183 days in Cyprus or another jurisdiction. As per the new test, all of the following three criteria should be met for an individual to be considered a Cyprus tax resident:
- - Remains in Cyprus for at least sixty(60) days in the year of assessment,
- - Carries out any business in Cyprus and/or is employed in Cyprus and/or holds an office to a person resident in Cyprus at any time during the year of assessment,
- - Maintains a permanent residence in Cyprus owned or rented by such individual
The main purpose of the law is to allow an individual who does not remain in any other state for one or more periods, which do not exceed 183 days in total, within the same year of assessment and who is not a tax resident in any other state for the same year of assessment, to be considered as a resident of the Republic of Cyprus.
The new law has not yet been published in the official gazette of the Republic of Cyprus but it is expected that it will be deemed to enter into force on 1st January 2017.
An individual who will be considered a Cyprus tax resident will be taxed on their worldwide income under Cyprus tax. Currently the income tax rates in Cyprus are as follows:
|Tax Base (EUR)||Tax rate (%)|
|Up to €19.500||0%|
|€19.501 to €28.000||20%|
|€28.001 to €36.300||25%|
|€36.301 to €60.000||30%|
Individuals who are Cyprus tax resident but are not domiciled in Cyprus will be exempt from special defense contribution which is levied on dividends, interest, and rental income.
The following tax incentives exist for individuals employed in Cyprus who were previously not tax residents:
- Lower of €8.550 or 20% of the remuneration from any office or employments exercised in Cyprus is exempt for a period of 5 years (this incentive will expire in 2020)
- For individuals with employment income exceeding €100.000 per annum, a 50% tax exemption exists which can be enjoyed for a period of 10 years.
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