OBTAINING THE TAX RESIDENCY STATUS IN CYPRUS

By: Andromachi Kleanthous, Associate of
Michael Kyprianou & Co LLC

According to the Income
Tax Law of 2002 (“the Law”) an individual is
resident in Cyprus, if he/she resides therein for a period which in aggregate
exceeds 183 days. 
Consequently, if an individual is physically present in Cyprus for more
than 183 days in a tax year, he/she will be considered tax resident of Cyprus
in that tax year.  On the other hand, if
an individual is physically present in Cyprus for less than 183 days in a tax
year, then he/she will be regarded to be non-tax resident of Cyprus in a tax year.

In the case
of a person who is resident in the Republic of Cyprus, tax shall be charged at
the rate or rates specified hereinafter for each year of assessment upon the
income accruing or arising from sources both within and outside the Republic,
in respect of:

• Any profits or other benefits from any
  business, office or employment;
• Any dividend, interest or discount;
• Any pension, amounts of income payable in
  accordance with a court judgment or in accordance with a term included in
  a will or agreement, as well as an annuity;
• Any rents, royalties, remuneration or
  other profits arising from property;
• Any amount received in consideration for
  any trade goodwill.

Possibility and procedure for obtaining the
status of tax resident in Cyprus for a foreign natural person:

·      
By means of investment into real estate;

·      
By means of investment into governmental securities;

·      
By means of investment into shares of companies;

·      
By any other ways.

According to
the Aliens and Immigration Regulations of 1972, a non-EU citizen is able to
obtain a Permanent Residence by investing in Cyprus.  However, again he/she has to prove that he is
residing in the
Republic for more than 183 days in that tax year.

A
non-Cypriot individual, who would like to be registered as tax resident in Cyprus, has to provide to the
Tax Authorities evidence that he/she has purchased or rented a property in
Cyprus.  Moreover, the utilities (water
bills, electricity bills and phone bills) of the property must be issued on the name of the individual who
will apply for tax residency in Cyprus.

The non-Cypriot
individual has to submit  an application to the Tax Authority along with
the following evidence that confirm that his/her
domicile is in Cyprus:

–         
Contract
of Sale/Rental Agreement;

–         
Utilities
under his/her name;

–         
Bank
Statements;

–         
Tickets;

–         
Copies of
the visa he/she had obtained to come to Cyprus.

Following the submission of  the application with the Tax Authorities,  this will be reviewed by the Tax Authorities who will issue a Certificate confirming the
residence status of the applicant.

The rates of tax for
individuals shall be as set out in the following table:

Chargeable income                                                               Rate of tax

On every euro up to
€19.500                                                        0%

On every euro in excess
of €19.500 – €28.000                           20%

On every euro in excess
of €28.000 – €36.300                           25%

On every euro in excess
of €36.300 – €60.000                           30%

On every euro in excess
of €60.000                                            35%

In case of an
individual who is not a resident in the Republic, tax shall be charged at the
rate or rates specified hereinafter for each year of assessment, upon the
income accruing or arising in respect of:

• Any profits or other benefits from a
  permanent establishment situated in the Republic;
• Any profits or other benefits from any
  office or employment exercised in the Republic, including the estimated
  annual value of any quarters, board or residence or of any other allowance
  granted in respect of office or employment, whether in money or otherwise,
  to the individual providing the salaried services or to any member of his
  family:

Provided that member of the Public Service of the Republic and employees
of public corporate bodies thereof serving abroad are deemed to be exercising their employment in the
Republic;

• Any pensions deriving from a past
  employment exercised in the Republic;
• Any rents, royalties, remuneration or
  other profits arising from property;  
• Any amount or consideration in respect of any trade goodwill reduced
  by any amount incurred for the purchasing of such trade goodwill.

The Law clearly
identifies how an individual can obtain
the Tax Residency in Cyprus.  If the
individual fails, in any case, to comply with
these Regulations, then the individual will lose his/her status as a tax resident of Cyprus.  In
order for a person to retain the status of a tax
resident of Cyprus, he/she has to reside in
Cyprus for more than 183 days in a tax
year. 

The
content of this article intends to provide a general guide to the subject
matter. Specialist advice should be sought on your specific circumstances. For
further information, please contact Andromachi Kleanthous at machi@kyprianou.com.cy