On 14 July 2017 the House of Representatives voted into law, an amendment to the definition of “Cyprus tax resident individual” as per the Income Tax Law.
The “60 day rule” intents to attract a significant number of individuals (investors, entrepreneurs, digital nomads, artists, sportsmen and other businessmen) who do not fulfil the tax residency requirements in any country. The absence of an established tax residency status may make them exposed to the tax authorities worldwide.
More specifically, as of 1 January 2017, an individual will be considered as a Cyprus tax resident, if:
• does not spend more than a total of 183 days in any State within a tax year and
• is not a tax resident of another State within the same tax year
and satisfies the following three conditions:
I. remains in Cyprus for at least 60 days in the tax year;
II. carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident person at any time during the tax year and
III. maintains a permanent home in Cyprus that is either owned or rented
It is important to note that, if the employment/business or holding of an office as per the condition (ii) is terminated, then the individual shall cease to be considered a Cyprus tax resident for the tax year under these extended rules.
For the purposes of calculating the days of stay in Cyprus:
a) the day of departure from Cyprus is considered as a day outside Cyprus;
b) the day of arrival in Cyprus is considered as a day in Cyprus;
c) arrival in Cyprus and departure from Cyprus within the same day is counted as one day outside Cyprus;
d) departure from Cyprus and return to Cyprus within the same day is counted as one day outside Cyprus.
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 exercises in Cyprus.
It is noted that for employment purposes in Cyprus with earnings in excess of Euro 100,000, an individual is allowed for an exemption from tax of 50% of the salary for a period of 10 years, which significantly reduces his income tax liability. At the same time, an individual is granted exemption from income tax or defense tax on dividends and interest received either in Cyprus or abroad, provided that such individual is considered as non – dom in Cyprus.
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