Andreas NicolaouIn order to understand your tax obligations, the first thing to consider is whether you're a tax resident of Cyprus. Tax residency is a way for a country to decide what kind of taxes you must pay there. Think of it as your “home base” for tax purposes. To be considered a tax resident of Cyprus you should meet either the '183-day rule' or the '60-day rule' for the tax year:
To qualify for the 183-day rule, you must stay in Cyprus for at least 183 days in a year. These days do not have to be consecutive. Once you do, you will be considered a tax resident of Cyprus. However, if you spend 183 days in any other country during the year, you will lose your tax residency in Cyprus for that year.
Since 2017, individuals can become tax residents of Cyprus using the 60-day rule. To do so, they must meet all the following conditions:
| 1 | Stay in Cyprus for at least 60 days in a year. |
| 2 | Work in Cyprus, run a business here or be an executive in a Cypriot company. |
| 3 | Have a permanent home in Cyprus (either rented or owned). |
| 4 | Not spend more than 183 days in any other single country. |
| 5 | Not be a tax resident in another country. |
Keep in mind that if you stop working or conducting business in Cyprus during the year, you will lose your tax residency.
the 60-day rule, you must first obtain a tax residence certificate. To do that, you must fill out form T.D. 126 and submit it to the Tax Department.
For the purpose of calculating the days of residence in the Cyprus:
| 1 | The day of departure from Cyprus is considered a day outside Cyprus. |
| 2 | The day of arrival in Cyprus is considered a day within Cyprus. |
| 3 | Arrival in Cyprus and departure from Cyprus on the same day is considered one day within Cyprus. |
| 4 | Departure from Cyprus and return to Cyprus on the same day is considered one day outside Cyprus. |
If you moved to Cyprus to start a business, having your company based and
tax-registered in Cyprus doesn't automatically make you a tax resident as an
individual. You'll have to meet the requirements for either the '183-day rule'
or the '60-day rule' if you want to be a tax resident.
Once you become a tax resident of Cyprus, you'll pay income tax on your income from sources inside and outside Cyprus.
If you're a Cypriot citizen and live here, you don't have to do anything since you're automatically considered a tax resident of Cyprus.
Domicile refers to the country that an individual treats as their home. Non-Cypriots who become tax residents can claim non-domicile status to get more tax benefits.
More specifically, non-domiciled individuals do not have to pay Special Defence Contributions on their dividends, interest and rental income. But, they still have to pay income tax as well as contributions towards the General Healthcare System.
There are two types of domicile:
Domicile of origin: This is the domicile you receive automatically once you are born.
Domicile of choice: This is where you have your permanent home.
If you are a Cypriot living in Cyprus, you are considered a Cypriot-domiciled individual. However, you will not be considered domiciled in Cyprus if you chose to domicile in another country and were not a tax resident of Cyprus for the last 20 years, even if born in Cyprus.
You will also be considered Cypriot-domiciled if you were a tax resident in Cyprus for 17 out of the last 20 years. This means that if you move out of Cyprus for a few years and return, you cannot claim non-domiciled status, regardless of your domicile of origin.
However, you can claim non-domicile status if you meet the following criteria:
| 1 | You have and maintain a domicile of choice (permanent residence) in another country. |
| 2 | You were not a tax resident of Cyprus for the last 20 years. |
| 3 | You have obtained Tax Residency and a Tax Identification Code in Cyprus. |
non-domicile status, you can apply by completing the questionnaire T.D.38Qa and form T.D.38 and submitting them to your local Tax Department office. Once approved, you will receive a certificate of non-domicile status.
