Tax residency under the 60 day rule

26.05.2022

An individual can be a tax resident of the Republic of Cyprus provided that he/she meets all of the following criteria within the same tax year:

1. does not spend more than 183 days in any other country, besides Cyprus;
2. is not a tax resident of any other country;
3. spends an aggregate period of more than 60 days in the Republic of Cyprus (not obligatory on uninterrupted basis);
4. carries on a business or is employed in Cyprus, or holds an office for a company tax resident in Cyprus (to get regular income) at any time during the tax year;
5. maintains a permanent home in Cyprus (either owned or rented) – it is necessary at least to enter into a lease contract of a dwelling for a term of (preferably) a year.

Taxation of individuals- tax residents in Cyprus

Income tax – Progressive tax rate:  

• 0% (taxable income EUR 0 –19 500);
• 20% (taxable income EUR 19 501 – 28 000);
• 25% (taxable income EUR 28 001– 36 300);
• 30% (taxable income EUR 36 301 – 60 000);
• 35% (taxable income EUR 60 001+).

1. Dividend income is exempt from income tax but special defense contribution is deducted (SDC) – 17%.
2. Interest income tax is exempt from income tax but SDC is deducted – 30%.

While having dividend and interest payment the contribution to General Healthcare System (GHS) in the amount of 2.65% is levied (levied from the income up to EUR 180 000 a year).

Non-domicile status in Cyprus

Acquiring this status will let obtain SDC exemption, which rates were mentioned above. As a result, contribution to healthcare (2.65% from the income up to EUR 180 000 a year) will only be levied on dividends and interest.

In brief, an individual can have a domicile of origin or a domicile of choice in Cyprus. An individual obtains a domicile of choice if he/she has been a tax resident of Cyprus for at least 17 out of 20 years prior to tax year.

So when obtaining tax residency of Cyprus the client will possess non-domicile status.