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15 October 2020

How to become a tax resident in Cyprus?

Cyprus has a flexible and democratic tax system.

For example, if you earn less than € 19,500 per year, the tax rate is 0%. This looks much more attractive than many European taxation systems.

Let's take a look.

Personal income tax depends on your income and is calculated as follows:

  • 0% on income from 0 to € 19,500
  • 20% on income from € 19,501 to € 28,000
  • 25% on income from € 28,001 to € 36,300
  • 30% on income from € 36,301 to € 60,000
  • 35% on income over € 60,000

How can an individual become a Cyprus tax resident? It's pretty simple. The following criteria must be met:

  • Have a place of residence in Cyprus: own real estate or rented housing for a long period
  • Stay in Cyprus more than 183 days in a calendar year
  • Not have the status of a tax resident of another country
  • Own a business or work in Cyprus

How the days of stay in Cyprus are calculated:

  • The day of arrival in Cyprus is considered the day inside the island
  • The day of departure from Cyprus is counted as a day outside the island
  • If you entered and left Cyprus on the same day, it is counted as one day inside
  • If you left and entered the territory of Cyprus on the same day, then the day is counted as one day outside.

However, there are some nuances that everyone needs to know about.

The Republic of Cyprus, in order to attract individuals, has developed a Non-Domicile regime. What are its advantages?

Foreign citizens, as well as citizens of Cyprus who received citizenship not by birth, have the right to obtain Non-Domicile status for 17 years of their stay in Cyprus. This status exempts the owner from paying taxes on the following types of passive income:

  • Interest or dividends from the deposit
  • Rent

Thus, having received tax resident status, an individual can receive tax-free dividends.

But from March 1, 2019, a contribution to the social insurance service in Cyprus was introduced - GESY, which does have a tax rate on passive income. The contribution is made from the first € 180,000 of income. The rate from March 01, 2020 is 2.65% for persons receiving passive income.

How to get Non-Domicile status?

To obtain the Non-Domicile status, you need to do the following:

  • Register with your local tax office, if you have not already done, and receive a personal TIC identification number. To do this, you must submit a completed TD2001 tax form. You can download the form from the website of the Cyprus Tax Administration at the link.
  • Submit to the tax office the originals of the completed TD038 and TD38QA forms, as well as their copies. The forms can be downloaded from the website at the link.
  • Provide your passport and ARC (Alien registration certificate), as well as provide copies of them.

Processing takes an average of a week, depending on the workload of the Cyprus Tax Department.

Also, to obtain status, you can seek the help of a specialized lawyer.

If you do not have Non-Domicile status, then dividends are taxed at a rate of 17%, and passive income: 30%.

Therefore, if you have the opportunity to obtain this status, it allows you to legally minimize taxes for the next 17 years.

Read more:

  • How to open a personal bank account in Cyprus? (link)
  • Pharmacies in Cyprus (link)
  • Heating systems in Cyprus houses (link)
  • Where to buy property in Limassol to rent out? (link)
  • Maintenance expenses for your own property in Cyprus (link)
Source: DOM LiVE
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