How to become a Cyprus tax resident and save on taxes

The tax system in Cyprus is one of the most favorable in Europe in terms of rates, benefits and the ability to obtain tax resident status. We have collected important information you need to know about Cyprus tax residency to optimize your taxes and sleep well.

Types of tax residency in Cyprus

There are two of them - domicile and non-domicile.

Only those born in Cyprus and people who have lived here for at least 17 out of the last 20 years get domicile. In other cases, a person receives the tax status of a non-domiciled Cyprus tax resident. The pros of the latter will be described in the article.

Advantages

Cyprus is considered a great place to live for good reason — here you can significantly reduce your taxes and prevent double taxation with your country of citizenship.

Cyprus Tax Residency:
  • no tax on profits from the sale of securities, including stocks, bonds, promissory notes;
  • no tax on dividends and interest under loan and royalty agreements;
  • no tax on property, luxury items and gifts;
  • the property tax was abolished in 2017; now the owners pay only the municipal tax, which is 0.1-0.2% of the property market value of the property;
  • no inheritance tax;
  • no pension income tax;
  • you can choose a special tax regime for foreign pension income - the first € 3 420 are not taxed, the rest of the pension income is taxed at 5%.

For those who are employed in Cyprus:
  • low rates of social insurance payments from wages;
  • 50% tax relief for income tax, if the income is more than € 100 thousand. The relief is given for 10 years. The key condition is that the person must not be a tax resident of Cyprus before being employed.
For those who work outside Cyprus for more than 90 days per year:
  • No Cyprus income tax on salaries from this employment..

Income with no tax exemption
Non-domiciles pay taxes at a progressive rate (from 0 to 35% depending on the amount of income) on income from
  • rental property in Cyprus and abroad;
  • employment in Cyprus;
  • sale of Cypriot real estate and shares of companies owning real estate in Cyprus;
  • commercial activities, for example, as a sole proprietor.

The first € 19.5 thousand of income is not taxed.
Scott Graham | Unsplash

How to obtain Cyprus tax residency

There are 2 main ways. A person is considered a tax resident of Cyprus if he or she meets the conditions of the 183 days or 60 days rules in a calendar year.

The 183 Days Rule
It’s easy. If you live in Cyprus for more than 183 days a year you are its tax resident.

The 60 days Rule
Itwasintroducedin 2017. It’s easy too, but with some points to keep in mind. First, you can’t have any other tax residency. You must:
  • reside in Cyprus for at least 60 days and avoid living in any other country for a time period of more than 183 days;
  • be employed or have business in Cyprus — be a director or owner of a Cyprus Tax Resident company;
  • buy or rent property to live in Cyprus during the tax period.
All these requirements are mandatory, tax resident status is revoked for any violation.

How to count days
Both the 60-day rule and the 183-day rule are counted by days as follows:
  • the day of arrival in Cyprus;
  • the day of arrival in Cyprus even if you left on the same day.
Don’t count:
  • the day of departure from Cyprus;
  • the day of departure from Cyprus even if you came back on the same day.
How to confirm: provide a certified copy of the passport with entry stamps, boarding passes, e-tickets.
Agus Dietrich | Unsplash

How to avoid double taxation

Submit the Cyprus tax residency certificate to the tax office in the country of your citizenship. It works for the countries that have signed a Double Taxation Treaty with Cyprus (including Russia). See full list here.

A tax residency certificate can be issued for the previous and current calendar year. To obtain a certificate, you need to pay a fee of € 80.

How to get a certificate under the 183-day rule:
  • register with the Cyprus Tax Authorities and get a Tax Identification Code;
  • fill in and submit to the Tax Authorities TD2001 form;
  • sign a declaration affirming that you intend to stay in Cyprus for more than 183 days in the current tax year. If, for any reason, you do not fulfill this requirement, the Tax Authorities must be informed to revoke the tax residence certificate;
  • provide evidence for foreign dividends or interest earned;
  • provide evidence for your intention to stay in Cyprus for more than 183 days (i.e. contract of employment, rental contract, property ownership);
  • tax returns of previous must be filed with Tax Authorities;
  • all taxes must be paid;
  • state the country for which the certificate is requested.

How to get a certificate under the 60-day rule:
  • register with the Cyprus Tax Authorities and get a Tax Identification Code;
  • fill in and submit to the Tax Authorities TD2001 form;
  • sign a declaration affirming that you intend to stay in Cyprus for more than 60 days in the current tax year. If, for any reason, you do not fulfill this requirement, the Tax Authorities must be informed to revoke the tax residence certificate;
  • provide evidence for foreign dividends or interest earned;
  • provide a certified copy of the passport with entry stamps;
  • provide a copy of the employment contract or a document confirming the legal status of the company ownership;
  • provide documents of real estate ownership or a rental agreement;
  • tax returns of previous must be filed with Tax Authorities;
  • all taxes must be paid;
  • state the country for which the certificate is requested.

Cyprus tax residency for citizens of Russia, Ukraine and Kazakhstan

Each country has a different interpretation of international rules on tax residency and the need to report on controlled foreign companies (CFCs). In short, it is easier for the Russians and more difficult for the citizens of Kazakhstan.

For citizens of Russia
Russian tax residents of Cyprus are not required to report on their controlled foreign companies. Their bank accounts and structures are not under control of the automatic tax information exchange with the Russian Federation. CFC rules were introduced in Russia in 2015.

For citizens of Ukraine
In Ukraine new rules on controlled foreign companies came into force in 2021. Now tax residents of Ukraine are required to declare foreign companies controlled by them and pay income tax in Ukraine.
Note: tax residency in Ukraine is primarily determined by the following factors - place of residence and center of life interests. The 183-day requirement is secondary. To revoke tax residency in Ukraine a relocation of the whole family to Cyprus is required.

For citizens of Kazakhstan
In Kazakhstan, tax residency is determined primarily by citizenship. This means that even if a citizen of Kazakhstan obtains Cyprus tax residency, this does not exempt him or her from tax and CFC obligations in Kazakhstan.
To terminate Kazakhstan tax residency you need to change your citizenship to Cypriot and move to Cyprus.

The best protection against high taxes

If the country of your citizenship, for any reason, considers you or your family to be its tax residents, Cyprus residence will not be a determining factor- taxes will have to be paid in the country of citizenship.

To avoid becoming a tax resident of both countries, the easiest way is to organize your full life in Cyprus. We will help you choose the best property, prepare all the documents for permanent residency and move the whole family to your home in Cyprus.
Memo
Cyprus has one of the lowest taxes in Europe, many benefits and tax optimization opportunities. The country has signed a Double Taxation Treaty with 65 countries, which allows you to obtain tax residency for just 60 days of residence in Cyprus in a calendar year.

We will help you deal with the documents, fulfill the conditions and quickly obtain the Cyprus tax residency. We will select the best real estate for those who want to obtain a permanent residency in Cyprus.

Our tax residency checklist
To become a tax resident in Cyprus you need:
  • either to live in Cyprus for more than 183 days a year;
  • or to live in Cyprus for more than 60 days a year, work there or do business, rent or buy real estate. At the same time, you cannot be a tax resident of another country.
To avoid any questions obtain a Cyprus tax residency certificate. For this:
  • register with the Cyprus Tax Authorities and submit a TD2001 form;
  • sign a declaration affirming that you intend to stay in Cyprus for more than 183 or 60 days;
  • provide evidence for your intention to stay in Cyprus for more than 183 or 60 days (i.e. contract of employment copy, document confirming the legal status of the company ownership, rental contract, property ownership)
  • provide evidence for foreign dividends or interest earned;
  • tax returns of previous must be filed with Tax Authorities and all taxes must be paid;
  • state the country for which the certificate is requested.

The certificate can be obtained for both previous and current year. You can get a certificate, even if you have not fulfilled the requirements under the 60- or 183-day rule during the current year in exceptional cases, when you need to reduce or refund foreign tax on dividends or interest received.

Not to lose information get a summary of the article

Summary of the article with a checklist in a PDF file convenient for storing and sending
Download presentation 
Enter your personal details for instant presentation download
We do not send spam and transfer data to third parties
Get a short summary of this article
Close
Navigation:
Contact:
Projects:
Address:
Paphos, Cyprus, 8010
20, Charalampou Mouskou
Grigori Afxentiou Street,

ABC BUSINESS CENTER,
5th Floor, Office 504
©2021 SPM real estate
We work with joy and pleasure
En