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New residency rules in Cyprus
Individuals are tax resident in Cyprus if they spend in Cyprus more than 183 days in any one calendar year. This is known as the “183 days rule”.
On 14 July 2017 a Cyprus tax law was amendment. Cyprus parliament added an additional rule for the residency of individuals effective from 1 January 2017. This rule will apply only to individuals not living in any other country more than 183 days and not being tax resident in any other country. How the Cyprus tax authorities will determine this condition to their satisfaction is unclear.
THE NEW RULE IS KNOWN AS THE “60 DAYS RULE”
An individual will be considered as tax resident of Cyprus, if he satisfies cumulatively the following three criteria:
- Stays in Cyprus for at least 60 days in a calendar year,
- Carries on any business in Cyprus and/or is employed in Cyprus and/or holds an office (director) in a company tax resident in Cyprus at any time in the tax year,
- Maintains a permanent house in Cyprus which is either owned or rented by the individual.
Individuals who may want to claim Cyprus residence under this rule should be aware that the residency rules differ from country to country. The 183 days rule is not universal.
In double tax treaty situations in case of doubt (dual residency situation), additional considerations are used such as:
a) the centre of vital interests,
b) habitual abode,
c) nationality and,
d) mutual agreement procedure.
An individual who is determined as resident of Cyprus under the new rule will be subject to tax on worldwide income with all tax breaks available to those who are non-domicile in Cyprus. Residents but non domicile are not taxed on dividend, passive interest and part of their rental income.
The new rule may impact negatively individuals already living in Cyprus less than 183 days but more than 60 days per year.
On the other hand individuals seeking a tax residence shelter must know that it is not enough to satisfy the Cyprus new rule. They must be able to prove that they are nowhere tax resident especially if a country with which Cyprus has a double tax treaty or an EU country also claims their tax residence.
Our external tax advisors are ready to help you deal with all issues pertaining to this new rule.
Consulco is an independent trust services and investment management group operating since 1993 and managed by Marios Hajiroussos, Dmitry Khenkin and Elena Hajiroussou.
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