What is Tax Residency in Cyprus?

In 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:

The 183-Day Rule Explained

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.

The 60-Day Rule: A More Flexible Approach

Since 2017, individuals can become tax residents of Cyprus using the 60-day rule. To do so, they must meet all the following conditions:

Eligibility Criteria for the 60-Day Rule

Keep in mind that if you stop working or conducting business in Cyprus during the year, you will lose your tax residency.

Steps to Apply for the 60-Day Rule

In order to become a tax resident of Cyprus under 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.

Calculating Days of Residence in Cyprus

For the purpose of calculating the days of residence in the 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.

Meeting the Economic Activity Requirement of the 60-Day Rule

For many expats and digital nomads looking to claim the 60-day rule in Cyprus and of course not spend the entire year in Cyprus, proving economic activity is often the hardest part. This usually means either working for a Cypriot company or running a business here.

What If You Work Remotely or Have an Online Business?

If you're working remotely for a company abroad or running your own online business, you might be wondering how you can meet the 60-day rule's economic activity requirement. If you have a job with a Cypriot company then you meet the requirement right away. But for most remote workers, it's a little trickier.

The Simple Solution: Start a Business in Cyprus

One of the easiest ways to meet the economic activity requirement is to set up a business in Cyprus. You can either be a contractor for a foreign company or move your existing business under a Cypriot entity. However, there are a few things to keep in mind.

How to Keep Your Company's Cypriot Tax Residency

To keep your company's tax residency in Cyprus (and meet the economic activity requirement for the 60-day rule), it must be managed and controlled from Cyprus. This might be a problem if you only plan to stay for 60 days and travel for the rest of the year.

The Workaround: Hire a Local Manager

If you don't want to be in Cyprus year-round, you can hire a local manager to run the company for you. As long as the company is managed and controlled from Cyprus, you'll meet the economic activity requirement, even if you're not there all the time.

Cost vs. Tax Benefits of This Setup: Is It Worth It?

While hiring a local manager does add some costs, it's definitely worth it when you consider the tax benefits you'll get by becoming a Cypriot tax resident. Here's what you can expect:

• 12.5% Corporate Tax
• 0% Dividend Tax
• 0% Income Tax (if your income is under €19,500)
• 0% Capital Gains Tax unless you're selling property in Cyprus

If this setup sounds like a good fit for you, just get in touch with us and we will help you get everything in place.

What is Non-Domicile Status?

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.

Domicile of Origin vs. Domicile of Choice

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.

Eligibility Criteria for Non-Domicile Status

You can claim non-domicile status if you meet the following criteria:

How to Apply for Non-Domicile Status

You can apply for non-dom status 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.

Is Moving to Cyprus the Right Move for You?

Cyprus really has one of the best tax setups for expats and digital nomads around the world. But whether it's the right move for you depends on your personal situation.

The point of this guide is to help you figure out if you can meet the requirements for tax residency and non-dom status, in case you're thinking about making Cyprus your home and saving on taxes while you're at it.

If this sounds like something you'd want to explore, just reach out to us. We can handle the entire process from setting up your company, taking care of all the registrations, and making sure your tax residency and non-dom status are sorted.

We know that finding the right lawyer or accountant in a foreign country can feel daunting, and the last thing you want is to feel like you're being "scammed." That’s why our platform makes this whole process as smooth and transparent as possible, so you can trust that everything will be handled properly.

FAQ: Common Questions About This Topic

Who is a non-domiciled tax resident in Cyprus?

A non-domiciled tax resident is someone who has obtained Cyprus tax residency (through either the 183-day or 60-day rule) but maintains their permanent home (domicile) in another country and hasn't been a Cyprus tax resident for the past 20 years. They must also have obtained a Tax Identification Code in Cyprus.

Is non-dom and 60-day rule the same?

No, these are separate concepts. The 60-day rule is one way to obtain tax residency in Cyprus, while non-dom status is a tax classification available to qualifying tax residents. You can be a 60-day rule tax resident with or without non-dom status, and you can be a non-dom resident under either the 183-day or 60-day rule.

Is there non-Dom capital gains tax in Cyprus?

Capital gains tax in Cyprus applies equally to both domiciled and non-domiciled residents. It's only charged at 20% on gains from the sale of Cyprus-located real estate or shares in companies holding Cyprus real estate. All other capital gains, including from stocks, bonds, and foreign property, are tax-free.

How to get 0% tax in Cyprus?

You can achieve 0% tax in Cyprus through a combination of strategies: 1) Income below €19,500 is tax-free, 2) Non-dom status eliminates Special Defence Contribution on dividends, interest, and rental income, 3) Most capital gains are tax-free except for Cyprus property, and 4) Dividend income from companies is tax-free for individuals.

Can I maintain tax residency in Cyprus if I travel frequently for work?

Yes, under the 60-day rule, you can maintain tax residency while traveling extensively. However, you must ensure you don't spend more than 183 days in any other single country and maintain your economic ties to Cyprus through a local business or employment.

What happens if I exceed 183 days in another country accidentally?

If you spend more than 183 days in another country, you'll lose your Cyprus tax residency status for that tax year and you will automatically become a tax resident of that country.

Do I need to register my remote work arrangement with Cyprus authorities?

If you're working remotely for a foreign employer, you'll need to establish a local business entity or contract with a Cypriot company to meet the economic activity requirement. Simply working remotely for a foreign company without local registration doesn't satisfy the 60-day rule requirements.

How strictly is the permanent home requirement enforced?

The permanent home requirement is taken seriously. A short-term holiday rental won't qualify - you need either a long-term lease agreement or property ownership. The home must be available for your use year-round, even if you're not physically present.

Can my spouse and children also claim non-dom status?

Each family member must qualify for non-dom status individually. If your spouse or children have different domicile histories or Cyprus residence patterns, they may not be eligible even if you qualify.

How does Cyprus verify my days of presence?

Cyprus uses entry and exit records from immigration, along with your submitted documentation. It's recommended to keep your own detailed travel log, including boarding passes and accommodation receipts, to support your residency claims.

Can I combine income sources from different countries while maintaining non-dom status?

Yes, you can have multiple income sources while maintaining non-dom status. The key benefit is that dividend, interest, and rental income from foreign sources won't be subject to Special Defence Contribution, regardless of where they originate.

What happens if my business activities in Cyprus decrease after establishing residency?

If your economic activity in Cyprus significantly decreases or ceases, you risk losing your tax residency status under the 60-day rule. It's essential to maintain consistent business operations or employment relationships throughout the tax year.

How does the Cyprus healthcare system work for tax residents?

As a tax resident, you must contribute to the General Healthcare System (GHS) regardless of non-dom status. Contributions are calculated based on your income, and you'll have access to public healthcare services even if you spend significant time abroad.