Obtaining the tax residency status in Cyprus

According to the Income Tax Law of 2002 (“the Law”) an individual is resident in Cyprus, if he/she resides therein for a period which in aggregate exceeds 183 days. Consequently, if an individual is physically present in Cyprus for more than 183 days in a tax year, he/she will be considered tax resident of Cyprus in that tax year. On the other hand, if an individual is physically present in Cyprus for less than 183 days in a tax year, then he/she will be regarded to be non-tax resident of Cyprus in a tax year.

In the case of a person who is resident in the Republic of Cyprus, tax shall be charged at the rate or rates specified hereinafter for each year of assessment upon the income accruing or arising from sources both within and outside the Republic, in respect of:

• Any profits or other benefits from any business, office or employment;
• Any dividend, interest or discount;
• Any pension, amounts of income payable in accordance with a court judgment or in accordance with a term included in a will or agreement, as well as an annuity;
• Any rents, royalties, remuneration or other profits arising from property;
• Any amount received in consideration for any trade goodwill.

Possibility and procedure for obtaining the status of tax resident in Cyprus for a foreign natural person:

• By means of investment into real estate;
• By means of investment into governmental securities;
• By means of investment into shares of companies;
• By any other ways.

According to the Aliens and Immigration Regulations of 1972, a non-EU citizen is able to obtain a Permanent Residence Permit by investing in Cyprus. However, again he/she has to prove that he is residing in the Republic for more than 183 days in that tax year.

A non-Cypriot individual, who would like to be registered as tax resident in Cyprus, has to provide to the Tax Authorities evidence that he/she has purchased or rented a property in Cyprus. Moreover, the utilities (water bills, electricity bills and phone bills) of the property must be issued on the name of the individual who will apply for tax residency in Cyprus.

The non-Cypriot individual has to submit an application to the Tax Authority along with the following evidence that confirm that his/her domicile is in Cyprus:

• Contract of Sale/Rental Agreement;
• Utilities under his/her name;
• Bank Statements;
• Air-Tickets;
• Copies of the visa he/she had obtained to come to Cyprus.

Following the submission of the application with the Tax Authorities, this will be reviewed by the Tax Authorities who will issue a Certificate confirming the residence status of the applicant.

The rates of tax for individuals shall be as set out in the following table:

Chargeable income                                                 Rate of tax
On every euro up to €19.500                                      0%
On every euro in excess of €19.500 – €28.000     20%
On every euro in excess of €28.000 – €36.300     25%
On every euro in excess of €36.300 – €60.000     30%
On every euro in excess of €60.000                         35%

In case of an individual who is not a resident in the Republic, tax shall be charged at the rate or rates specified hereinafter for each year of assessment, upon the income accruing or arising in respect of:

• Any profits or other benefits from a permanent establishment situated in the Republic;
• Any profits or other benefits from any office or employment exercised in the Republic, including the estimated annual value of any quarters, board or residence or of any other allowance granted in respect of office or employment, whether in money or otherwise, to the individual providing the salaried services or to any members of his family: Provided that members of the Public Service of the Republic and employees of public corporate bodies thereof serving abroad are deemed to be exercising their employment in the Republic;
• Any pensions deriving from a past employment exercised in the Republic;
• Any rents, royalties, remuneration or other profits arising from property;
• Any amount or consideration in respect of any trade goodwill reduced by any amount incurred for the purchasing of such trade goodwill.

The Law clearly identifies how an individual can obtain the Tax Residency in Cyprus. If the individual fails, in any case, to comply with these Regulations, then the individual will lose his/her status as a tax resident of Cyprus. In order for a person to retain the status of a tax resident of Cyprus, he/she has to reside in Cyprus for more than 183 days in a tax year.

The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on your specific circumstances. For further information, please contact Andromachi Kleanthous.