Category: Residence and Citizenship

Background to the “60 Day” Tax Residency Rule

In July 2017, the Cyprus Parliament voted for an amendment to the then criteria used to determine Cyprus tax residency. In addition to the 183 day rule, a second test was introduced in relation to an individual’s tax position in Cyprus: the 60 Day Tax Residency Rule.

• The “183 day rule” applies to individuals who have physically resided in Cyprus for more than 183 days during one calendar year.
• In addition to this, a second test was implemented whereby an individual can become Cyprus tax resident in 60 days. This rule is applicable to individuals who do not spend more than 183 days in Cyprus or in any other jurisdiction.

Since the implementation of the 60 day tax rule, a number of individuals have relocated to Cyprus to take advantage of the various tax benefits that are available.

Criteria to be Met for an Individual to Meet the “60 Day” Residency Rule

The “60 day rule” applies to individuals who in the relevant tax year:

• reside in Cyprus for at least 60 days;
• operate/run a business in Cyprus and/or are employed in Cyprus and/or are a director of a company which is tax resident in Cyprus. Individuals must also have a residential property in Cyprus which they own or rent;
• are not tax resident in any other country;
• do not reside in any other single country for a period exceeding 183 days in aggregate.

Overview – Cyprus

Cyprus has positioned itself well, as a country of choice for both individuals and corporations, through the availability of various tax incentives and benefits. The numerous tax incentives offered has seen a steady flow of EU and non-EU nationals establishing their business operations in Cyprus. In addition, individuals find Cyprus a tax efficient location to structure their personal tax positions, by taking advantage of flexible tax resident rules and the non-domicile tax regime.

As an EU member state, Cyprus offers a pleasant climate, adequate infrastructure, and a convenient geographical location. There are two main airports which provide frequent flights to most European cities, as well as several international destinations.

Days Spent In and Out of Cyprus

For the purpose of the rule, days “in” and “out” of Cyprus are defined as:

• the day of departure from Cyprus counts as a day out of Cyprus;
• the day of arrival in Cyprus counts as a day in Cyprus;
• arrival in Cyprus and departure on the same day counts as a day in Cyprus;
• departure from Cyprus followed by a return on the same day counts as a day out of Cyprus.

What are the Advantages of Being a Cyprus Tax Resident?

Non-Domicile Status

The non-domicile tax regime is particularly interesting for individuals whose main source of income is either dividend or interest income, as these sources of income will not be taxable in Cyprus. In addition, individuals can take advantage of the exemption from taxation of capital gains (other than on the sale of immoveable property in Cyprus).

Employment Income Exemption

On 26 July 2022, the long-anticipated enhancement of this tax incentive for individuals took place.

• The new provisions allow for a 50% exemption from taxation, for income in relation to first time employment in Cyprus, for individuals with annual remuneration over 55,000. The previous remuneration threshold had been €100,000.

This exemption is available for a period of 17 years.

Exemptions on Income from Employment Outside Cyprus

Individuals who are employed outside of Cyprus for more than 90 days aggregate in a tax year, by a non-Cyprus tax resident employer or foreign permanent establishment of a Cyprus tax resident employer, are exempt from income tax on this income.

Additional Information

For additional information about the attractive 60 Day Tax Residency Rule for individuals moving to Cyprus, please contact advice.cyprus@dixcart.com.

Background

Malta, without doubt, is one of the countries with the greatest number of residency routes; there is a programme for everyone.

Located in the Mediterranean, just south of Sicily, Malta offers all of the advantages of being a full member of the EU and Schengen Member States, has English as one of its two official languages, and a climate many chase all year round. Malta is also very well connected with several international airlines, including: British Airways, Lufthansa, Emirates, Qatar, Turkish Airlines, Ryanair, EasyJet, WizzAir and Swiss, which fly into and out of Malta almost daily.

Its location in the centre of the Mediterranean has historically given it great strategic importance as a naval base, with a succession of powers having contested and ruled the islands. Most of the foreign influences have left some sort of mark on the country’s ancient history.

Malta’s economy has enjoyed large growth since joining the EU and the forward thinking Government actively encourages new business sectors and technologies.

Malta Residence Programmes

Malta is unique in that it offers nine residence programmes to meet different individual circumstances.

Some are appropriate for non-EU individuals, whilst others provide an incentive for EU residents to move to Malta.

These programmes include those offering individuals a fast and efficient way to obtain a European permanent residence permit and visa-free travel within the Schengen Area, as well as another programme designed for third country nationals to legally reside in Malta but maintain their current job remotely. An additional regime is targeted towards professionals earning over a certain amount each year and offering a flat tax of 15%, and finally, there is a programme for those who have retired.

• It should be noted that none of the Malta residence programmes have  language test requirements.

The Nine Malta Residence Programmes

Here is a quick breakdown:

• Malta Permanent Residence Programme – open to all third country, non-EEA, and non-Swiss nationals with a stable income and sufficient financial resources.
• Malta Start-Up Programme – this new visa allows non-European nationals to relocate and live in Malta, by establishing an innovative start-up. founders and/or co-founders of the start-up can apply for a 3-year residency permit, together with their immediate family, and the company to apply for 4 additional permits for Key Employees.  
• Malta Residence Programme – available to EU, EEA, and Swiss nationals and offers a special Malta tax status, through a minimum investment in property in Malta and an annual minimum tax of €15,000.
• Malta Global Residence Programme – available to non-EU nationals and offers a special Malta tax status, through a minimum investment in property in Malta and an annual minimum tax of €15,000.
• Malta Citizenship by Naturalisation for Exceptional Services by Direct Investment – a residence programme for foreign individuals and their families who contribute to the economic development of Malta, which can lead to citizenship.
• Malta Key Employee Initiative – a fast-track work permit application programme, applicable to managerial and/or highly-technical professionals with relevant qualifications or adequate experience relating to a specific job.
• The Malta Highly Qualified Persons Programme – available to EU nationals for 5 years (may be renewed up to 2 times, 15 years in total), and non-EU nationals for 4 years (may be renewed up to 2 times, 12 years in total). This programme is targeted at professional individuals earning more than €81,457 per annum and seeking to work in Malta in certain industries.
• Qualifying Employment in Innovation & Creativity Scheme – targeted towards professional individuals earning over €52,000 per annum and employed in Malta on a contractual basis at a qualifying employer.
• Digital Nomad Residence Permit – targeted at individuals who wish to maintain their current job in another country, but legally reside in Malta and work remotely.
• Malta Retirement Programme – available to individuals whose main source of income is their pensions, paying an annual minimum tax of €7,500.

The Remittance Basis of Taxation

To make life even more enjoyable, Malta offers tax benefit to expatriates on some of the residence programme such as the Remittance Basis of Taxation

Individuals on the certain residence programmes in Malta that are resident non-domiciled individual is only taxed on Malta source income and certain gains arising in Malta. They are not taxed on non-Malta source income not remitted to Malta and are not taxed on capital gains, even if this income is remitted to Malta.

Additional Information and Assistance

Dixcart can assist in providing advice as to which programme would be most appropriate for each individual or family.

We can also; organise visits to Malta, make the application for the relevant Maltese residence programme, assist with property searches and purchases, and provide a comprehensive range of individual and professional commercial services once relocation has taken place.

For further information about moving to Malta please contact Jonathan Vassallo: advice.malta@dixcart.com.

Dixcart Management Malta Limited Licence Number: AKM-DIXC.

Why Portugal?

Portugal is currently a topic of conversation, across the world, for several reasons. It is more than just the sunny weather, low cost of living, great food, variety of world winning wines and charming people, that everyone is speaking about.

The reason is simple: Portugal is a place people actually want to live and can see the possibility of raising a family and doing business in. A combination of factors now encourages leading entrepreneurs to establish and grow their companies in Portugal.

Portugal- A Few Facts and Figures

Portugal is projected to exceed the European economic growth forecasts, at least until 2024. It has been ranked as one of the best places to live according to the Global Peace Index (currently ranking 6^th on the 2022 Global Peace Index), offers very good healthcare according to the Health Care Index (with an average life expectancy of 82.47 years in 2022), and is ranked highly from an education point of view.

Traditional Portuguese Universities have become “Top Ranking” International Universities, the  “Universidade Católica Portuguesa” and “Nova SBE” were included as two of the best universities in the world by the British newspaper, The Financial Times, in 2018.

It is without a doubt a place that ticks the boxes when choosing a place to live.

Portugal’s Golden Visa – Evolution

The Golden Visa program became increasingly popular after its introduction, and attracted world attention to Portugal. The world came to learn about Portugal and having the Golden Visa, as essentially a plan B; not having to move to Portugal to be eligible, but keeping it as a potential second option for the future if things do not work out where individuals currently live, people have now shifted their attention to plan A; making a permanent move to work and live in Portugal.

Of course, moving to Portugal requires more than just a visa and there needs to be economic reasons  to do so. It is becoming rapidly apparent that the economic potential is vast and powerful in Portugal, especially when taking into account that it is a small European country on the tip of the western continent.

The D2 Visa – Becoming ‘Golden’

The D2 visa is the real Golden Visa, as it not only allows you to benefit from living in Portugal, with unlimited access to the Schengen area, but provides the opportunity to benefit from access to one of Europe’s best places to establish a business, by living there.

Portugal has become known as the California or Silicon Valley of Europe. Successful global tech events such as the Web Summit have now taken place in Lisbon for several years running – testament to the fact that it is a place that is finding the right people with the right mindset.

The D2 visa is essentially an entrepreneurial visa.

D2 Visa: The Criteria

Requirements include the following:

• Be a non-EU national
• Have sufficient funds to support yourself during your stay in Portugal
• Incorporate a Portuguese (or Madeiran) company
• Prepare a business plan
• Hold a clean criminal record
• Be willing to reside in Portugal, the visa being issued for the period of 2 years and having to spend 18 consecutive months or 16 intermittent months in this period of 2 years.
• Show proof of a place to live in Portugal
• Be willing to become a fiscal resident in Portugal

Why Should You Reach out To Dixcart?

We are celebrating our 50^th anniversary this year, with Dixcart having had a presence in the Portuguese market, for over 30 years. We have thus dealt with many structures and arrangements from start to finish, working with international investors and families from many corners of the earth. As a trusted service provider, we look forward to welcoming you as a client.

In addition to assisting entrepreneurs to select the most appropriate legal route to structure their activities in Portugal, Dixcart also provides:

• A complete range of services relating to the incorporation of a company and its day-to-day obligations; from bookkeeping through to tax compliance.

• Assistance to entrepreneurs and their families in relocating to Portugal and in obtaining the necessary residence permits.

Additional Information

If you require additional information regarding the D2 visa and the types of company and tax frameworks available in Portugal and/or the types of visa and residence options, please contact Lionel de Freitas at the Dixcart office in Portugal at: advice.portugal@dixcart.com 

Switzerland is a very attractive location to live and work for many non-Swiss nationals. It offers amazing scenery as well as a number of world-famous cities such as; Berne, Geneva, Lausanne, and Zurich. It also offers an attractive tax regime for individuals as well as for companies, in the right circumstances.

We interview Thierry Groppi in our Dixcart office in Switzerland, on what it is like moving to Switzerland and living there. Thierry is the Business Development Manager in our Dixcart Office in Switzerland.

How long can individuals stay in Switzerland as a tourist?

I am often asked this question.

Non-Swiss nationals are allowed to stay in Switzerland as tourists, without registration, for up to three months. After three months, if they are planning to stay in Switzerland, they must obtain a work and/or residence permit, and formally register with the Swiss authorities.

What is the situation regarding working in Switzerland?

There are three ways to be entitled to work in Switzerland:

• Being hired by an existing Swiss company.
• Forming a Swiss company and become a director or an employee of the company.
• Investing in a Swiss company and become a director or an employee of the company.

When applying for Swiss work and/or residence permits, it is important to note that different regulations apply to EU and EFTA nationals compared to other nationals, so it is worth checking.

The most popular route is definitely individuals forming a company in Switzerland. This is because EU/EFTA and non-EU/EFTA nationals can form a company, be employed by it, reside in Switzerland, and benefit from the attractive tax regime.

What is the minimum investment required for Swiss residency, when forming a company by a Non-EU/EFTA citizen?

The company must present a business plan detailing how the amount to be invested in it will generate a turnover of CHF 1 million or more per annum, in the ‘near future’, and the business plan has to show that the company will achieve this turnover in a specified number of months, not necessarily in the first year (particularly if the company is a start-up).

Can individuals gain Swiss residency through investment in real estate?

No, Switzerland does not offer a real estate investment programme.

Non-Swiss nationals can only gain Swiss residency through the ‘Swiss Business Investment Programme’, detailed above or through the Swiss Lump Sum System of Taxation.

Swiss based real estate can be purchased after gaining a residence permit. Quotas may be applicable to non-Swiss nationals in relation to owning a second residence in Switzerland.

What is Swiss Lump Sum Taxation?

The Swiss Lump Sum System of Taxation is extremely popular. This annual tax is based on the applicant’s ‘expenses’ (not income), which is generally calculated as being 7 times the applicant’s annual rent.

A tax rate is then applied to the individual’s expenses and depends on the canton. The tax rate is generally between 21% and 46%, as agreed with the relevant cantonal tax authority.

Minimum deemed expenses, are detailed by many cantons, some of which are listed below:

• Aargau – CHF 400,000
• Bern – CHF 400,000
• Geneva – CHF 600,000
• Fribourg – CHF 250,000
• Lucerne – CHF 600,000
• Ticino – CHF 400,000
• Schwyz – CHF 600,000
• St Gallen – CHF 600,000
• Uri – CHF 400,000

What are some of the advantages of living in Switzerland?

There are so many advantages of living in Switzerland.

It has, and continues to be, one of the most sought-after countries to live in, in the world. It is a safe and neutral country, it has high standards of living and education, there are a variety of multicultural cities, and it is an all-round beautiful country with pristine lakes and the backdrop of the Alps.

It is also excellent for businesses. Business is investment friendly in Switzerland, and there is a great banking system.

How can an individual become a Swiss Citizen?

An EU or non-EU/EFTA national must have lived at least 10 years in Switzerland to be able to apply for a Swiss passport.

However, if an EU or non-EU/EFTA national is the spouse of a Swiss national, they need only to have lived in Switzerland for 5 years.

A child of a Swiss national (under the age of 18) will automatically be granted Swiss nationality. 

What reputation does a Swiss passport have?

A Swiss passport is very well respected across the world. It is well ranked in the world passport rankings in terms of visa free travel, with Swiss citizens able to travel, visa free, to 172 countries.

Which cities are well-known and popular to live in?

Geneva, Zurich, Bern, Lausanne, Basel, Lucerne, and Lugano are some of the most well-known cities in Switzerland, and are definitely the most popular in terms of where people live after relocating to Switzerland.

What languages are widely spoken in Switzerland?

English is spoken everywhere, as well as the three national languages of: French, German and Italian.

Is Switzerland in Schengen?

Yes, Switzerland is a Schengen signatory, enabling free movement for Swiss nationals within the EU. A Swiss residence card also allows for free movements in Schengen countries.

Does Switzerland have tax treaties?

Yes, Switzerland has a large number of tax treaties, just over 100 in total.

Additional Information

For additional questions about how to relocate to Switzerland, or what it is like to live and work in Switzerland, please get in touch: advice.switzerland@dixcart.com.

According to New World Wealth who compiled the data for the Henley Global Citizens Report, a projected 88,000 of the world’s millionaires will move to a new country by the end of the year.

High-net-worth individuals (HNWIs) with a net worth of over US$1 million are extremely mobile following the Covid-19 pandemic, as well as the current war in Ukraine which is having global repercussions. Due to the lockdown and travel restrictions from Covid-19, there are no specific reports for 2020 and 2021 but as restrictions have now eased, momentum is gaining as relocation has become front of mind for many of the ultra-rich.

It will come as no surprise that Russia and Ukraine are projected to see some of the biggest emigration numbers, by the end of 2022. Andrew Amoils, the head of research at New World Wealth stated in the report that “Russia [is] haemorrhaging millionaires […] Affluent individuals have been emigrating from Russia in steadily rising numbers every year over the past decade, an early warning sign of the current problems the country is facing”. Russia is projected to see 15% of their HNWIs moving (projected 15,000).

However, it is Ukraine that is expected to suffer the greatest loss of HNWIs as a proportion of its population – a huge 42% of its HNWIs, could leave by the end of 2022; a predicted net loss of 2,800 millionaires.

China and India are also predicted to see their millionaire populations relocate. General wealth growth in China has been slowly declining in the past few years, which could lead to China seeing its most damaging year yet.

India on the other hand is not so concerning. Predicted figures are suggesting that India will see approximately 8,000 HNWIs migrate during 2022, however there is also a suggestion that those who have relocated in the past, are returning. In the next few years, we would not be surprised if the HNWI population in India rises substantially, which will then make it one of the biggest growing wealth markets at that time.

The UAE

During 2022, the UAE is expected to draw in the largest inflow of HNWIs, with approximately 4,000 millionaires from; Russia, India, Africa, and the Middle East moving to the country. The UAE has been known as a ‘millionaire magnet’ for many years; it has a robust international business hub, sits at the top amongst the world’s most competitive tax systems, and offers a luxury lifestyle from education, leisure activities, shopping, and hospitality, to its top-end real estate sector. With the UAE predicted to surpass the US this year, the US is rapidly losing its appeal as a haven for the world’s wealthiest.

Australia

In second place sits Australia – approximately 3,500 HNWIs will move to Oz before the end of 2022 (and according to the New World Wealth, 80,000 millionaires have already relocated in the last two decades). It is one of the largest countries in the world, rich in natural resources and fertile land, and has a thriving economy.

Singapore

Singapore is a favoured location, mainly for the rest of Asia. Emerging as Asia’s top wealth management centre, this makes sense. A net inflow of approximately 2,800 HNWIs is expected to find a home in this prosperous country.

Israel

Israel sits closely behind, with large numbers of HNWIs from the UK, France and Russia set to move there; approximately 2,500 during the year.

Switzerland

But it is Switzerland we are keeping our eye on. Even though Switzerland is not part of the EU, it is within the Schengen area, and has always been an elite jurisdiction in which to settle down. Switzerland is projected to attract a net inflow of around 2,200 in 2022.

It has always featured amongst the top most attractive countries for high-net-worth individuals to live, being one of the world’s wealthiest countries and known for its impartiality and neutrality. In 2021 Geneva was listed as one of the wealthiest cities in the world with the total wealth held in the city amounting to US$875 billion.

Portugal

A consistent favourite, fuelled by the ‘Golden visa’ of Golden visas. Over the last decade, Portugal has seen HNWIs, wealthy entrepreneurs and ultra-rich investors from around the globe, predominantly from Turkey, South Africa, and South America, but also most recently from the US, relocate to its sunny shores. With the current hype around digital nomadism and the D7 visa, the younger generation of HNW families are setting up shop in Lisbon. An expected inflow of 1,300 HNWIs is expected in Portugal in 2022.

Greece

More and more HNWIs are relocating to Greece and applying for its Golden visa programme, with millionaires from Turkey, Russia, Ukraine, and China all favouriting the country. Greece is expected to see around 1,200 HNWIs apply in 2022. Dixcart has already seen interest, especially around the opportunities that are presented by obtaining a Greek residence permit but becoming tax resident in Cyprus and benefiting from the Cypriot non-dom tax regime.

Malta

Whilst just outside the top 10 list of countries gaining millionaires in 2022, Malta still has an important spot. Approximately 300 millionaires are expected to move to Malta in 2022, joining at least 2 billionaires already registered on the island.

In terms of wealth growth, the island currently has one of the fastest growing markets, with its strong economic performance in recent years being driven by its shift towards fast-growing services such as; finance, e-gaming and tourism, and its citizenship by naturalisation programme which has brought substantial new wealth to the island.

Summary

“Countries that draw wealthy individuals and families to migrate to their shores tend to be robust, with low crime rates, competitive tax rates, and attractive business opportunities,” Amoils has stated.

Dixcart Domiciles offers specialist advice regarding various residence programmes around the world. 

We can help you discover the different countries around the world that offer attractive residence and/or citizenship programmes and those that might suit you and your family best, and provide advice on a number of tax efficient solutions that might be available.

Get in touch

If you are considering relocating and would like to speak to an adviser to find out which programme and/or country best suits you and your family’s needs, please contact us: advice@dixcart-domiciles.com.

Why Cyprus?

Cyprus is an attractive option for individuals who are considering a change of their tax residency.

This island offers; a warm climate, good infrastructure, convenient geographic location, membership of the EU, tax advantages for companies and incentives for individuals through the Cyprus non-domicile regime.

Main Benefits of Legislation Passed in 2015

A change in the tax legislation took effect on the on 16 July 2015

Among the approved changes in Tax Legislation, individuals qualifying under the Non-Domicile tax regime are exempt from the ‘Special Defence Tax’ (SDC).

SDC taxation is a taxation levied on individuals when receiving certain sources of income. Through the SDC exemptions granted, Individuals qualifying under the Non-domicile Tax regime are now exempt from taxation on the following sources of Income:

• Interest; and
• Dividends; and
• Capital gains (other than on the sale of immoveable property in Cyprus); and
• Capital sums received from pensions, provident and insurance funds; and
• Capital sums remitted to Cyprus

All of the tax benefits detailed above are enjoyed even if the income has a Cyprus source and/or if it is remitted to Cyprus.

In addition there are: NO wealth and NO inheritance taxes in Cyprus.

Other Beneficial Features of the Cyprus Tax System for Individuals

• Income Tax Reduction for New Residents in Cyprus

Individuals who were not previously resident in Cyprus, take up residence in Cyprus for work purposes, and earn over €55,000 per annum, are entitled to the following tax benefit:

• 50% of employment income earned in Cyprus is exempt from income tax for a period of 17 years.

For reference, Cyprus’ standard income tax rates are:

• €0 to €19,500: 0%
• €19,501to €28,000: 20%
• €28,001to €36,300: 25%
• €36,301to €60,000: 30%
• Greater than €60,000: 35%

• Low Tax Rate: Foreign Pensions

The first €3,420 of a pension, from employment outside Cyprus, is tax free and individuals can elect to pay only 5% income tax on pension income in excess of this amount.

The Definition of Tax Residence and Non-Domicile Status

An Individual is considered tax resident, if they spend more than 183 days in Cyprus in any one calendar year. Under certain criteria individuals can become tax resident in Cyprus in 60 days.

Definition of Non-Domiciled Individuals

In accordance with the provisions of the Wills and Succession Law, there are two kinds of domicile:

• domicile of origin; i.e. the domicile received at birth (generally dependent on the father’s side), or
• domicile of choice; i.e. domicile acquired by establishing physical presence in a particular place and by demonstrating sufficient intention to make it the place of permanent residence

Regardless of the domicile of origin or choice, individuals who have been tax residents in Cyprus for at least 17 out of the last 20 years prior to the tax year in question, will be deemed to be domiciled in Cyprus for the purposes of the SDC Tax.

In any event, an individual who has spent 17 of the past 20 years, prior to the relevant tax year, as a Cyprus tax resident will be considered domiciled in Cyprus.

Summary

Non-domicile status in Cyprus offers a number of tax related benefits to individuals who are tax resident in Cyprus. The regime introduced in July 2015 offers an enhanced range of financial incentives for individuals to consider Cyprus as an attractive destination for their tax residence.

Additional Information

For further information about the attractive tax regime for individuals in Cyprus, please contact Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Why Move to Cyprus?

Cyprus is an appealing European jurisdiction, located in the eastern Mediterranean Sea and offering a warm climate and attractive beaches. Situated off the southern coast of Turkey, Cyprus is accessible from Europe, Asia, and Africa. Nicosia is the centrally located capital of the Republic of Cyprus. The official language is Greek, with English also being widely spoken.

Cyprus offers a palette of personal tax incentives for expatriates and high net worth individuals relocating to Cyprus.

Personal Taxation

• Tax Residence in 183 days

If an individual becomes tax resident in Cyprus by spending more than 183 days in Cyprus in any one calendar year, they will be taxed on income arising in Cyprus and also on foreign source income. Any foreign taxes paid can be credited against the personal income tax liability in Cyprus.

• Tax Residence under the 60 Day Tax Rule

An additional scheme has been implemented whereby individuals can become tax resident in Cyprus by spending a minimum of 60 days in Cyprus, provided that certain criteria are met.

• Non-Domicile Tax Regime

Individuals who were not previously tax resident can also apply for non-domicile status. Individuals who qualify under the Non-Domicile Regime are exempt from tax on; interest*, dividends*, capital gains* (apart from capital gains derived from the sale of immovable property in Cyprus), and capital sums received from pension, provident and insurance funds. In addition, there is no wealth and no inheritance tax in Cyprus.

*subject to contributions to the national health system at the rate of 2.65%

Income Tax Exemption: Moving to Cyprus to Take up Employment

On the 26^th of July 2022 the long-anticipated tax incentives for individuals have been implemented. As per the new provisions of the income tax legislation, a 50% exemption for income in relation to first employment in Cyprus is now available for individuals with annual remuneration in excess of EUR 55.000 (previous threshold EUR 100.000). This exemption will be available for a period of 17 years.

Nil/Reduced Withholding Tax on Income Received from Abroad

Cyprus has more than 65 tax treaties that provide for nil or reduced withholding tax rates on; dividends, interest, royalties, and pensions received from abroad.

Lump sums received as a retirement gratuity are exempt from tax.

In addition, a Cypriot tax resident, receiving pension income from abroad may choose to be taxed at a flat rate of 5%, on amounts exceeding €3,420 per year.

Additional Information

For additional information about the attractive tax regime for individuals in Cyprus, please contact Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Why Cyprus?

Cyprus has become an attractive option for companies and individuals. Advantageous tax incentives exist and Cyprus is popular as both a corporate and residential location, offering a sound infrastructure, and also enviable weather. 

Benefits Enjoyed by Tax Residents of Cyprus who are not Domiciled in Cyprus

As a result of pre-existing tax legislation and the exemption from Cyprus’ Special Contribution to Defence Tax (SDC), introduced in 2015 legislation, non-domicilaries benefit from a ZERO rate of tax on the following sources of income:

• Interest
• Dividends
• Rental income
• Capital gains (other than on the sale of immoveable property in Cyprus – subject to a partial exemption on newly acquired property)
• Capital sums received from a pension, provident or insurance fund

These zero tax benefits are enjoyed, even if the income has a Cyprus source and is remitted to Cyprus.

• In addition there are NO wealth or inheritance taxes in Cyprus.

Other Beneficial Features of the Cyprus Tax System for Individuals

• Income Tax Reduction for New Personal Income Tax Payers

Individuals who were not previously resident in Cyprus and take up residency in Cyprus for work purposes are entitled to the following reduction, as long as their annual salary is greater than €55,000:

• 50% of the salary earned in Cyprus is exempt from income tax for a period of seventeen years.

• Low Tax Rate: Foreign Pensions

Individuals receiving a pension arising from services provided abroad can elect to pay an income tax rate of 5% on pension income in excess of €3,420.

July 2015 Legislation

On 9 July 2015 the Cyprus House of Representatives approved new tax laws which provide significant benefits to high-net-worth individuals relocating to Cyprus. It is since this time that Cyprus has operated a non-dom regime.

The main benefits of the new legislation were:

• Special Defence Tax (SDC) exemption for Cypriot non-domiciled tax residents
• Extension of the personal income tax reduction on the salaries of new residents
• Capital gains tax exemption: on newly acquired Cyprus immoveable property
• Reduction in land registry fees
• Corporation tax: notional interest reduction

The Definition of Residence and Non-Domicile in Cyprus for SDC Purposes

• In July 2017, the Cyprus Government voted for an amendment, establishing a new “60 day rule”. This new rule applies to individuals who, in the relevant tax year:
  • reside in Cyprus for at least 60 days.
  • operate/run a business in Cyprus or are employed in Cyprus or are directors of companies which are taxed in Cyprus. Individuals must also have a residential property which they own or rent.
  • are not tax resident in another country.
  • do not reside in any other single country for a period exceeding 183 days in aggregate.

If individuals physically reside in Cyprus for more than 183 days in one calendar year, they are considered Cyprus tax resident. This is known as the “183 day rule”.

If the applicant satisfies either the “183 day rule” or the “60 day rule” and becomes tax resident in Cyprus (but not domiciled there), the tax benefits detailed above can be enjoyed.

Summary

The non-domicile status in Cyprus offers a number of additional benefits to high net worth individuals, who are not domiciled in Cyprus. The regime offers additional financial incentives for individuals to consider Cyprus as an attractive destination for residence.

Additional Information

For further information about the attractive personal tax regime in Cyprus, please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Cyprus is an attractive option for the relocation of both companies and individuals.

This island offers a warm climate, good infrastructure, convenient geographic location, membership of the EU, tax advantages for companies and incentives for individuals through the Cyprus non-dom regime.

Background

The Cyprus House of Representatives approved new tax laws on 9 July 2015, which took effect on 16 July 2015. These changes provide significant benefits to high-net-worth individuals and to companies, relocating to Cyprus.

The Main Benefits

The mail benefits of the legislation include:

• Special Defence Tax exemption for Cypriot non domiciled tax residents
• Extension of the personal income tax reduction relating to the salaries of new residents
• Corporation tax: notional interest reduction

Zero Tax Benefits Enjoyed by Tax Residents of Cyprus Who Are Not Domiciled in Cyprus

As a result of previous tax legislation AND the exemption from the Cyprus Special Contribution for Defence Tax (“SDC”) introduced in July 2015, non-domiciliaries benefit from a zero rate of tax on the following sources of income:

• Interest
• Dividends
• Capital gains (other than on the sale of immoveable property in Cyprus)
• Capital sums received from pension, provident and insurance funds

Zero Tax Benefits Even if Income is Remitted to Cyprus

The zero tax benefits detailed above are enjoyed even if the income has a Cyprus source and it is remitted to Cyprus.

In addition there are NO wealth and NO inheritance taxes in Cyprus.

Other Beneficial Features of the Cyprus Tax System for Individuals

Income Tax Reduction for New Residents in Cyprus

Individuals who were not previously resident in Cyprus, take up residence in Cyprus for work purposes, and earn over €55,000 per annum, are entitled to the following tax benefit:

• 50% of employment income earned in Cyprus is exempt from income tax for a period of 17 years.

Cyprus’ standard income tax rates are:

• €0 to €19,500: 0%
• €19,501to €28,000: 20%
• €28,001to €36,300: 25%
• €36,301to €60,000: 30%
• Greater than €60,000: 35%

Low Tax Rate: Foreign Pensions

The first €3,420 of a pension from employment outside Cyprus is tax free, and individuals can elect to pay only 5% income tax on pension income in excess of this amount.

The Definition of Residence and Non-Domicile in Cyprus for “SDC” Purposes

An individual is tax resident in Cyprus if he/she spends more than 183 days in any one calendar year in Cyprus. Before July 2015, income received by Cyprus tax residents from dividends, rent and interest, was subject to the Special Contribution for Defence Tax (SDC). This was a significant disadvantage for high-net-worth individuals as their worldwide passive income, especially dividends, suffered a high level of taxation in Cyprus.

This is why the introduction of the “non-domicile” tax status has been so important:

• The law of July 2015 specifies that tax resident individuals who are non-Cyprus domiciled are completely exempt from SDC irrespective of where their income is generated or remitted to.

The main source of income for many HNWIs is dividends. Cyprus is now particularly attractive as dividend income is exempt from income tax and non-domiciled individuals are also exempt from SDC.

The Definition of Domicile in Cyprus

The term “domiciled in Cyprus” is defined in law as an individual who has a Cypriot domicile of origin in accordance with the Wills and Succession Law or has obtained a domicile of choice outside of Cyprus, provided that the individual has not been tax resident in Cyprus for at least 20 years prior to the relevant tax year.

In any event, an individual who has spent 17 of the past 20 years, prior to the relevant tax year, as a Cyprus tax resident will be considered domiciled in Cyprus.

Summary

Non-domicile status in Cyprus offers a number of benefits to high-net-worth individuals who are not domiciled in Cyprus. The regime introduced in July 2015 offers additional financial incentives for individuals to consider Cyprus as an attractive destination for residence.

Additional Information

For further information about the attractive tax regime for individuals in Cyprus please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Cyprus offers; a warm climate, good infrastructure, convenient geographic location, membership of the EU, tax advantages for companies and incentives for individuals through the Cyprus non-dom regime.

Background

A tax law, approved by the Cyprus House of Representatives in 2015, provides significant benefits to individuals and to companies, relocating to Cyprus.

The Main Benefits

The main benefits of the legislation, in relation to individuals, include:

• Special Defence Tax exemption for Cypriot non-domiciled tax residents;
• Extension of the personal income tax reduction relating to the salaries of new residents.

Tax Exemptions Enjoyed by Tax Residents of Cyprus Who Qualify under the Non- domicile Tax Regime in Cyprus

As a result of previous tax legislation and the exemption from the Cyprus Special Contribution for Defence Tax (“SDC”) introduced in July 2015, non-domiciliaries are exempt from taxation in Cyprus on the following sources of income:

• Interest;
• Dividends;
• Capital gains (other than on the sale of immoveable property in Cyprus);
• Capital sums received from pensions, provident and insurance funds.

Capital Sums Remitted to Cyprus are Not Subject to Taxation

The tax benefits detailed above, are enjoyed even if the income has a Cyprus source or if it is remitted to Cyprus.

In addition there are NO wealth and NO inheritance taxes in Cyprus.

Other Beneficial Features of the Cyprus Tax System for Individuals

Income Tax Reduction for New Residents in Cyprus

On the 26^th of July 2022 the long-anticipated tax incentives for individuals have been implemented. As per the new provisions of the income tax legislation, a 50% exemption for income in relation to first employment in Cyprus is now available for individuals with annual remuneration in excess of EUR 55.000 (previous threshold EUR 100.000). This exemption will be available for a period of 17 years.

Low Tax Rate: Foreign Pensions

The first €3,420 of a pension from employment outside Cyprus is tax free, and individuals can elect to pay only 5% income tax on pension income in excess of this amount.

Cyprus’ Standard Income Tax Rates are:

• €0 to €19,500: 0%;
• €19,501to €28,000: 20%;
• €28,001to €36,300: 25%;
• €36,301to €60,000: 30%;
• Greater than €60,000: 35%;

The Definition of Residence and Non-Domicile in Cyprus for “SDC” Purposes

An individual is considered as tax resident in Cyprus if they spend more than 183 days in any one calendar year there. Prior to the introduction of the Non-domicile tax regime, income received by Cyprus tax residents from dividends, rent and interest, was subject to the Special Contribution for Defence Tax (SDC).

This is why the introduction of the “non-domicile” tax status was so important. The law of July 2015 specifies that tax resident individuals, who are non-Cyprus domiciled, are completely exempt from SDC irrespective of where their income is generated or remitted from.

• The Cyprus non-domicile tax regime is therefore particularly interesting for individuals whose main source of income is either dividend or interest income. In addition, individuals can take advantage of the exemption from taxation on capital gains.

The Definition of Domiciled in Cyprus

 The term “domiciled in Cyprus” is defined by law as an individual who has a Cypriot domicile of origin, in accordance with the Wills and Succession Law, which is the domicile of his/her father at the time of his/her birth. Or alternatively, an individual who is considered a Cyprus tax resident, as per the Income Tax Law, for a period of at least 17 years out of the last 20 years before the relevant tax year, irrespective of his/her domicile of origin.

Summary

Non-domicile status in Cyprus offers a number of tax related benefits.

The regime, introduced in July 2015, offers additional financial incentives for individuals to consider Cyprus as an attractive destination for tax residence, and these incentives continue to be in place.

Additional Information

For further information about the attractive tax regime for individuals in Cyprus, please contact Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.