Newsletter 18

 

26 July 2017

CYPRUS INDIVIDUAL TAX RESIDENCY

The new ''60 days rule''

On 14 July 2017, the Cypriot Parliament approved the law amending Section 2 of the Income Tax Law with respect to the tax residency of individuals (published in the Official Gazette of the Republic on 28th of July 2017). The amending legislation, will be effective retroactively as of 1 January 2017.

The Income Tax Law has been amended so that an individual who does not remain in any state for one or more periods which together exceed 183 days in the same tax year and who is not tax resident in any other state for the same tax year, be considered to be a tax resident of Cyprus, provided that they meet the following conditions:

1. Remain in Cyprus for at least 60 days during the tax year
2. Pursue a business in Cyprus and/or work in Cyprus and/or are a director of a company which is tax resident in Cyprus, at any time during the tax year
3. Maintain a permanent residence in Cyprus, which can be either owned or rented

To be considered as Cyprus tax resident in the tax year, the taxable person’s involvement in the business and/or employment in Cyprus and/ or the holding of a post in Cyprus must not have not have ceased.

For the purposes of calculating the days of stay in Cyprus the following rules apply:

• The day of departure from the Republic is considered to be a day out of the Republic
• The day of arrival into the Republic is considered to be a day in the Republic
• The arrival into the Republic and departure from the Republic on the same day is considered to be a day in the Republic
• The departure from the Republic and return to the Republic on the same day is considered to be a day out of the Republic

Thus, under the new provisions, an incentive is given to an individual who is not a tax resident in any other state for the same tax year to transfer his tax residence to Cyprus and to be taxed only on income from the activities the individual undertakes in Cyprus.