Tax & Residency Guide in Cyprus

## Comprehensive Tax Guide for Cyprus

Cyprus is a popular destination for expatriates due to its favourable tax system and attractive lifestyle. Understanding the tax obligations in Cyprus is crucial for residents and non-residents alike. In this guide, we will delve into the residency triggers, tax system type, treaties, entity options, filing requirements, rates, deductions, when to hire an advisor, and country-specific strategies in Cyprus.

### Residency Triggers

In Cyprus, an individual is considered a tax resident if they spend more than 183 days in a tax year (January 1st to December 31st) in the country. The days do not need to be consecutive. Additionally, an individual can be considered a tax resident if they spend more than 60 days in Cyprus in a tax year and do not qualify as tax residents in any other country.

### Tax System Type

Cyprus operates a worldwide income tax system for tax residents. This means that residents are taxed on their income earned both within Cyprus and abroad. Non-residents are only taxed on income earned within Cyprus.

### Tax Treaties

Cyprus has an extensive network of double tax treaties with over 60 countries, including the UK, the US, Germany, and many others. These treaties aim to avoid double taxation on income earned in both Cyprus and the treaty country. It's essential to consider these treaties when planning your tax obligations.

### Entity Options

In Cyprus, individuals can choose from several entity options for their business activities, including sole proprietorships, partnerships, and limited liability companies. Each entity type has different tax implications, so it's crucial to select the most suitable option based on your business needs and tax planning.

### Filing Requirements

Tax residents in Cyprus are required to file an annual income tax return by the 31st of July of the following tax year. Non-residents with income sourced from Cyprus must also file a tax return. Failure to comply with the filing requirements can result in penalties and fines.

### Tax Rates

Cyprus has a progressive tax system with tax rates ranging from 20% to 35% for individuals. The first €19,500 of annual income is tax-free for residents, and there are various tax credits and deductions available to reduce the tax liability further. Corporate tax rates in Cyprus are among the lowest in the EU at 12.5%.

### Deductions

Cyprus offers various deductions and allowances to reduce the tax burden for individuals and businesses. Common deductions include contributions to social insurance, pension funds, and charitable donations. It's essential to keep track of eligible deductions to maximise tax savings.

### When to Hire an Advisor

Navigating the complex tax laws in Cyprus can be challenging for individuals and businesses. It's advisable to hire a tax advisor or accountant with expertise in Cypriot tax law to ensure compliance and maximise tax efficiency. A tax advisor can help you with tax planning, filing requirements, and identifying opportunities for tax savings.

### Country-Specific Strategies

For individuals considering relocating to Cyprus, there are several country-specific tax planning strategies to explore. These include:

1. Immovable Property Tax Relief: Cyprus offers tax incentives for individuals who invest in immovable property in the country. Understanding the eligibility criteria and tax benefits can help you make informed investment decisions.

2. Non-Domiciled Status: Cyprus offers a non-domiciled status for individuals who are not domiciled in Cyprus. This status can provide significant tax advantages for foreign income and investments.

3. Employment Income Structuring: Properly structuring your employment income in Cyprus can help you take advantage of tax credits and deductions available to residents. Consulting with a tax advisor can help you optimise your tax position.

In conclusion, understanding the tax obligations in Cyprus is essential for residents and non-residents to comply with the law and maximise tax efficiency. By familiarising yourself with the residency triggers, tax system type, treaties, entity options, filing requirements, rates, deductions, and country-specific strategies outlined in this guide, you can effectively manage your tax affairs in Cyprus. Remember, when in doubt, consult with a tax advisor for expert guidance tailored to your specific situation.