Taxation of Individuals, Cyprus

Brief summary of the Cyprus Tax system for individuals residing from abroad

A physical person’s liability to Cyprus tax is determined by their residence status for taxation purposes. The general rule applying for the tax basis of an individual is that where the individual is considered a tax resident in the Republic, tax is imposed on his/her income accruing or arising from sources all over the world (both within and outside the Republic). On the other hand, where the individual is not a tax resident in the Republic, tax is imposed on his/her income accruing or arising only from sources within the Republic.

Tax Basis

An individual is tax resident of Cyprus if he/she remains in the Republic for a period exceeding 183 days in a tax year.

With effect from 1 January 2017, an individual may also be considered tax resident in Cyprus if he/she satisfies the “60 days rule”. The “60 days rule” applies to individuals who in the relevant tax year:

• do not spend more than a total of 183 days in any country; and
• are not tax residents of another country within the same tax year

and satisfy also the following three conditions:

• they remain in Cyprus for at least 60 days during the tax year;
• they carry on a business in Cyprus or are employed in Cyprus or hold an office in a Cyprus tax resident company at any time during the tax year; and
• maintain a permanent residence in Cyprus (owned or rented).

All of the above conditions need to be satisfied in order for the individual to be considered as a Cyprus tax resident with the ‘’60 days rule’.

If the employment/business or holding of an office is terminated during the tax year, the individual will cease to be considered a Cyprus tax resident for that tax year under the ’60 days rule’ but may still be considered tax resident if the basic 183-day rule is satisfied.

For the purposes of both the “183 days rule” and the “60 days rule”, days in and out of Cyprus are calculated as follows:

• the day of departure from Cyprus counts as a day of residence outside Cyprus;
• the day of arrival in Cyprus counts as a day of residence in Cyprus;
• arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus;
• departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus.

The tax rates for individuals are the following:

Obligation to file tax return

There is no minimum number of days or minimum amount of income that exempts a person from the requirement to file an income tax return and pay tax in Cyprus, if any (special exemption for non-filing of tax return may only be granted by the Council of Ministers through a Decree).

Taxable period

In Cyprus, the tax year is the calendar year.

Types of taxable income

All earnings, whether paid in cash or in the form of a benefit-in-kind granted by the employer to the employee (i.e. rental benefit, private use of a motor vehicle, etc.), are taxable unless specifically exempted. Further, pensions, annuities,

rental income, etc. are also taxable in Cyprus.

Compliance obligations

Individuals’ compliance obligations

All individuals should make a request to obtain a tax number from the Tax Department and then with their tax number should be registered online with the Taxisnet system to be able to submit their income tax returns. Income tax returns can only be submitted electronically. In this respect, the deadlines for the electronic submission of income tax returns are as follows:

• For employees and pensioners: 31 July following the tax year-end.
• For self-employed individuals whose annual turnover does not exceed EUR 70,000 and who do not have an obligation to prepare audited financial statements: 31 July following the tax year-end.
• For self-employed individuals whose annual turnover exceeds EUR 70,000 and therefore have an obligation to prepare audited financial statements: 31 March that is fifteen months (15) following the year end.

Payment of taxes

Tax on employment income must be withheld by the employer, under the Pay-As-You-Earn (PAYE) system and remitted to the tax authorities monthly.

For employees and pensioners who are not obliged to prepare audited financial statements, a final balancing tax payment must be made by 31 July of the following year.

For self-employed individuals preparing audited financial statements (gross annual turnover equal €70.000 or more), a final balancing payment must be made by 1 August of the following year.

KYRAKOS ANTONIOU AND ASSOCIATES LLC can advice and assist you with your tax obligations in the Republic of Cyprus, you can contact us at [email protected] or call at 00357 25 206919