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Marilia Paraschou

Marilia Paraschou

Moving to Cyprus? Tax Residency withholding Tax Exemption

Individuals wishing to move to Cyprus and become Cyprus tax residents have the opportunity to enjoy, for at least 17 years, a full exemption from withholding tax on worldwide dividend and interest income.

Tax Residency for Individuals in Cyprus

As per applicable tax rules, an individual who remains in Cyprus for more than 183 days in a calendar year is considered a tax resident in the island.

Residency under the 60-day rule

A person who does not reside in any other country for one or more periods exceeding 183 days during a tax year and who is not tax resident in any other country can be considered as a tax resident of Cyprus.

This can be done by meeting the following requirements:

  • The individual resides in Cyprus for at least 60 days in the year of assessment; and
  • The individual maintains a business, is employed or maintains an office in Cyprus; and
  • The individual has a permanent residence in Cyprus, which can be either owned or rented.

The Cyprus tax legislation was amended to also provide that, it is possible for a person to become a tax resident by being physically present in Cyprus for at least 60 days.

This 60-day rule is an alternative option for foreigners wishing to transfer their personal tax residency to Cyprus. The 60-day rule has been especially attractive for international business people.

Cyprus Taxation for non-doms & Benefits

Income from certain sources (mainly dividends and passive interest income) is exempt from Income Tax and instead is subject to Special Defence Contribution (SDC), with the applicable rates currently being 17% for dividends and 30% for interest.

Foreigners who move their tax residency to Cyprus are automatically considered as non-domiciled for tax purposes in the island, for a maximum of 17 years and enjoy a full exemption from SCD tax (withholding tax) on worldwide dividend and interest income. Such (dividend, interest or rental) income will only be subject to General Health system tax of only 2.65%.

 

  Other considerations  
The obtaining of a new personal tax residency (e.g., in this case being Cyprus) does not automatically mean that the person stop being considered a tax resident in his/her previous country of residence or in any other country. As such, foreigners wishing to move their personal tax residency to Cyprus and who no longer wish to be considered tax residents in another jurisdiction must separately ensure that they have taken all necessary steps to this effect – and that is always in accordance with that other country’s laws, regulations and practices.

Should you wish to find out more contact our team.

Should you wish to find out more contact our team.

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