Get Cyprus Tax Residency
Get Cyprus Tax Residency
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An individual is considered to be tax resident in the Republic of Cyprus provided that he/she was physically present in the Republic of Cyprus for a period exceeding 183 days.
A tax resident in the Republic of Cyprus is taxed in the Republic of Cyprus on its worldwide income. The tax rates applicable to tax resident individuals are the following:
It is worth noting that some specific types of income are subject to Special Defense Contribution. More specifically, the Special Defense Contribution is imposed on dividends, interest, Cyprus Government saving bonds / Cyprus Government development stocks / approved Provident Fund / Social Insurance Fund / Individual whose total income (incl. interest) does not exceed €12.000 and rents. Subject to the exceptions provided for in the Cyprus legislation (especially for legal persons), the Special Defense Contribution rates applicable to tax residents are the following:
On that basis and subject to a series of exceptions provided for in the Cyprus legislation, in order for a natural person to be considered as a tax resident of the Republic of Cyprus for the purposes of Special Defense Contribution, he/she must be a ‘tax resident in the Republic of Cyprus’ for income tax purposes while, at the same time, he/she must have either his/her:
- Domicile of origin in the Republic of Cyprus: the domicile that a person acquires at the time of his/her birth.
- Domicile of choice in the Republic of Cyprus: the domicile that a person acquires and maintains as a result of his/her actions and intentions.
Despite the above, even if domiciled, an individual might be considered as non-domiciled (and, thus, not liable to pay special defence contribution) in the following cases:
An individual is considered to be tax resident in the Republic of Cyprus provided that he/she was physically present in the Republic of Cyprus for a period exceeding 183 days.
A tax resident in the Republic of Cyprus is taxed in the Republic of Cyprus on its worldwide income. The tax rates applicable to tax resident individuals are the following:
- In case he/she had his/her domicile of origin in Cyprus but has obtained a domicile of choice abroad provided he/she was not Cyprus tax resident for at least 20 years before the tax year in which he becomes tax resident of Cyprus;
- In case he/she had his/her domicile of origin in Cyprus but was not Cyprus tax resident for at least 20 years before the law come into effect.
That said, an individual who has his/her domicile of origin abroad but who is considered as Cyprus tax resident, will not be subject to SDC unless he/she is a tax resident of Cyprus for at least 17 out of the 20 last years – then, he/she is liable for SDC as from the 18th year onwards.
Going further, in terms of taxation of legal persons, companies whose management and control is exercised in Cyprus are considered as tax residents in the Republic of Cyprus and, thus, are subject to corporation tax at a rate of 12,5% (following the deduction of related expenses incurred in the course of production of this income) in regards to the income arising from sources both within and outside Cyprus. The main exceptions from the imposition of income tax that apply to all Cyprus companies are the following:
- Dividend income;
- Interest income (other than interest arising out of the ordinary course of the business and interest earned by a collective investment scheme);
- Foreign exchange gains (other than foreign exchange gains arising from trading in foreign currencies and related derivatives);
- Gains arising from the disposal of securities;
- Gains arising from the restructuring of a loan;
- Profits from a permanent establishment situated outside Cyprus;
- Rents from preserved buildings;
- Benefits or profits arising in the course of an approved reorganization scheme.
Nevertheless, although management and control is not limited to pre-defined criteria, some of the indicators (which are not conclusive) proving that management and control is exercised in Cyprus are the following:
- Registered and actual office in Cyprus;
- Cypriot residents as directors;
- Strategic (day to day) management decisions are taken in Cyprus;
- BoD meetings in Cyprus;
- General/Extraordinary meetings in Cyprus;
- Bank accounts operating in Cyprus;
- Commercial documentation of the company is stored in the office maintained by the company in Cyprus;
- Accounting records of the company are maintained in Cyprus etc.
In this respect, it is important to note that whether management and control is exercised in Cyprus shall be determined in accordance to the peculiarities of each particular case while such tax status will be examined both by the Cyprus tax authorities and the foreign tax authorities of any other involved country.
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