Cyprus offers various personal tax incentives for foreigners and high-net-worth individuals relocating to Cyprus, such as zero tax on dividends and tax exemption on capital gains from the sale of shares. To enjoy these benefits, individuals must meet the criteria for Cyprus tax residency, including the Cyprus 60 Day Rule, which simplifies the process of becoming a tax resident.
Tax Residency Until 2017
Until 2017, an individual was considered a Cyprus tax resident if he or she had spent more than 183 days in Cyprus during a tax year. As a result, if an individual spent less than 183 days in Cyprus during a tax year, the individual would not have been considered a tax resident.
Introduction of the Cyprus 60-Day Rule
The Tax Law has been amended from 2017 to allow an individual who spends a minimum of 60 days in Cyprus in a tax year to become a Cyprus tax resident for the same year, provided certain conditions are satisfied. This is the “60-day rule”.
Conditions for the Cyprus 60-Day Rule
The conditions that must be satisfied are:
- Does not stay in another country for one or more periods exceeding 183 days
- Is not a tax resident in another country for the same tax year
- Carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident company at any time during the tax year
- Maintains a permanent residence in Cyprus, either owned or rented
Clarifications and Amendments
The Tax Law was further amended to clarify that an individual who fits all the conditions under the ’60-day rule’ would not be considered a Cyprus tax resident if their business, employment, or office holding position has been terminated during that year.
It was recently clarified through a circular issued by the Tax Department, that individuals who are claiming Cyprus tax residency based on the 60-day rule for a tax year, but at the same time are considered a tax resident in countries where their tax year differs from that of Cyprus, that condition (2) above is not violated. This is subject to approval from the Cyprus Tax Commissioner.
Determining Days in Cyprus
To determine the days in Cyprus, the Income Tax Law states that:
- A day of departure from Cyprus is a day out of Cyprus
- A day of arrival into Cyprus is a day in Cyprus
- Arrival into Cyprus and departure from Cyprus on the same day is a day in Cyprus
- Departure from Cyprus and return to Cyprus on the same day is a day out of Cyprus
Understanding and adhering to the Cyprus 60-day rule is crucial for individuals seeking Cyprus tax residency and the associated tax benefits.
