The question “How to become a tax resident of Cyprus?” is among the most frequently asked questions. The fact is that life in Cyprus is attractive not only because of the good climate, but also because of the flexible taxation system.
First, let’s look at the tax system itself to understand why it is called flexible. Many seek to move to Cyprus and they are interested not only in the issue of buying a home, but also in the status of a tax resident, and for good reason.
The amount of tax payments is directly proportional to your income:
– 0-19500€/year – 0%
– 19500-28 000€/year – 20%
– 28000-36300€/year – 25%
– 36300-60 000€/year – 30%
– more than 60 000€/year – 35%
In addition, there are special exemptions for foreign citizens. For example, the status of non-domicile, which we also discussed in detail in this article.
Interested? Then let’s go directly to the answer to the question of how to become a tax resident of Cyprus.
Cyprus tax resident status for an individual
If you are an individual and wish to obtain Cyprus tax residency, it is important to know that there are 2 types of conditions. Regular residency rule and 60 day rule:
For the ordinary rule, there is only one condition that allows you to become a tax resident of Cyprus:
- You must spend 183 days in one calendar year in Cyprus.
But if you want to be a tax resident of Cyprus, but stay in the country for only 60 days a year, it is important to fulfill the following conditions
- have your own property in Cyprus or rent housing for a long time (daily rental housing in Cyprus is not suitable).You can find out more about how to buy a property in Cyprus in our blog;
- you must not have the status of a tax resident of another state;
- you must be employed or have your own business in Cyprus,
- and, accordingly, you must be in Cyprus for at least 60 days during a calendar year.
Perhaps many are interested in how the days of your stay in Cyprus are calculated:
- the day of arrival in the country is considered as a full day of stay in Cyprus;
- however, the day of departure will be counted as a day outside of Cyprus;
- if on the same day you entered Cyprus and left the territory of the Republic, this will be considered as a day spent in Cyprus;
- and departure and entry on the same day, on the contrary, will be regarded as a day outside Cyprus.
With the rest of the days, everything should be clear.
How to get Non-Domicile status in Cyprus
Non-Domicile status is a small tax relief for foreign citizens and Cypriot citizens who were not born in the country. The status is obtained for 17 years of being in Cyprus. This status exempts you from the special defense contribution that is levied on passive income.
- not to pay tax on dividends and interest from the deposit;
- excludes tax on passive income from rent;
For example, if you are a citizen of Russia and a tax resident of Cyprus, then in order to obtain Non-Domicile status, you need to register with the tax authorities of Cyprus.To register and get your tax number – TIC – you need to submit a certain list of documents to the tax office:
- completed form TD2001;
- originals and copies of forms TD038 and TD38QA;
- originals and copies of the international passport and the alien’s registration book (ARC).
You can find these forms for downloading and filling out on the Cyprus tax website.
Is it worth getting Non-Domicile status? If you have your own passive income, then definitely! For comparison, without this status, you will pay a tax of 17% on dividends, 30% on interest on bank deposits, 3-75% on property rental income. Moreover, obtaining Non-Domicile takes only a week.
Optimize your taxation with Non-Domicile: exempt yourself from paying contributions to the defense of Cyprus for 17 years.
However, even Non-Domicile status will not exempt you from paying another type of contribution from your passive income. The fact is that in 2019, GESY was introduced – a special contribution to the Cyprus Health Fund, which, among other things, is also subject to passive income. At the moment, its rate is 2.65%.
Obtaining the status of a tax resident in Cyprus: the result
In this article, we have addressed one of the important questions for those who are planning to buy a property in Cyprus or have already done so.
You could see for yourself that the Cyprus taxation system is convenient and flexible. But you should also not forget about the additional benefits for foreign citizens that the Non-Domicile status gives.
Using this knowledge, you can more confidently consider Cyprus as a permanent residence and a country to buy a home. And if you want to know more about how to buy property in Cyprus, you can read other articles on this topic on our blog!
Do you have any questions? Get a free consultation from a real estate agency!