The “60-day” Rule- A New Concept of Tax Residency in Cyprus
On 14th July 2017 the Cyprus parliament voted for a Cyprus tax law amendment namely the “60 day rule” which will co-exist with the already established “183-day rule”. The “60 day rule” is a further effort of the Cypriot government to attract foreign investment to Cyprus and bolster Cyprus’ reputation as a European financial hub.
Under the “183 day rule”, an individual who spends at least 183 days a year in Cyprus is considered a Cyprus tax resident. The “60 day rule” aims to attract a significant number of individuals who do not qualify under the “183 day rule”, (investors, entrepreneurs, digital nomads, artists, sportsmen and other businessmen) who do not fulfill the tax residency requirements in any country and who therefore in the absence of an established tax residency status may be exposed to the tax authorities worldwide.
The “60-day rule” is effective as from tax year 2017 and applies to the individual who in the relevant tax year meets ALL of the following conditions:
remain in Cyprus for at least 60 days during the tax year in question; and
do not reside in any other single state for a period exceeding 183 days, and
is not tax resident in any other state; and
carry out business activities in Cyprus and/or work in Cyprus and/or be a director in a company that is tax resident in Cyprus at any time of the tax year in question; and
maintain a permanent residence in Cyprus (either owned or rented).
It is to be noted, that even if an individual meets the aforementioned conditions, s/he is not considered a Cyprus tax resident, if his/her business and/or employment in Cyprus and/or position in a Cyprus tax resident have ceased.
How to calculate the days of residency in Cyprus?
the day of departure from Cyprus is considered as a day outside of Cyprus;
the day of arrival in Cyprus is considered as a day in Cyprus;
arrival in Cyprus and departure from Cyprus within the same day is considered as one day in Cyprus;
departure from Cyprus and return to Cyprus within the same day is considered as one day outside of Cyprus.
Tax benefits for individuals who take up tax residency in Cyprus
Furthermore, the Cyprus government has introduced an array of tax incentives as stated below aimed at attracting high salaried executives to migrate. Individuals who become Cyprus tax residents, whether under the “60 day rule” or under the “183 day rule” will be eligible for these incentives:
An exemption from special contribution for defence tax for non domiciled tax residents which covers dividend income (normally taxed at 17%), interest income (normally taxed at 30%) and rental income (normally taxed at 3%) for 17 years once the person has taken up tax residency in Cyprus.
An exemption of first employment income: Individuals taking up tax residence and employment in Cyprus are entitled to an exemption from taxation of 20% on their annual income from employment in Cyprus. This exemption is limited to €8.550 per annum and is available until the year 2020.
An exemption for individuals earning income from employment exceeding €100.000 per annum, a 50% tax exemption is available for 10 years. Note that only one of exemptions (ii) and (iii) can be claimed by a particular taxpayer.
If an individual satisfies the “60-day rule”, they should then consider what further steps they need to take, for instance registering as a tax resident with the Cyprus Tax Authorities, considering whether the non-domicile rules apply to him as well as obtaining and maintaining relevant evidence concerning his tax residency status.
Non-domiciled Cyprus tax residents enjoy substantial benefits including inter alia exemptions from payment of taxes on dividends, interest, rent and sale of securities, subject to certain conditions.
MPC Legal can assist all impacted individuals in assessing their Cyprus tax position under the new regime and what further actions are needed to be undertaken and can assist individuals in benefiting from this new legislation.
Please feel free to contact MPC at for further information.
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