Author: Katrien de Poorter

Some incredible historical sites to see the next time you are in Cyprus

From ancient archaeological sites to charming towns, Blue Flag beaches and delicious eateries – Cyprus should be on your bucket list of places to visit.

Your first stop should be the Kato Paphos Archaeological park, a UNESCO World Heritage site in the heart of Paphos. Step back in time, unwind in the history and culture, and discover a world of ancient treasures. For anyone who loves Greek mythology, these ruins are not to be missed – include the Roman houses, the seashell floor of House Dionysus and the magnificent amphitheatre in your wander round.

Day 2 – head to Aphrodite’s rock, the birthplace of the ancient Greek goddess of love. Found along the coast between Paphos and Limassol, there is a nearby beach and a viewing pavilion to get the best view. It is said the goddess Aphrodite emerged from the foamy water when Uranus was cut by a sickle and fell into the sea.

Day 3 – discover the Tombs of the Kings, an ancient necropolis a short walk up the scenic coastal path from Paphos. This burial site is one of the most popular historical sites in Cyprus – it is another UNESCO World Heritage site that dates back over 5,000 years. The tombs were built for people of local importance but were named Tombs of the Kings due to the architecture and design. What makes visiting the site really special is that you can step inside and explore the tombs yourself.

Last but not least, set aside time to wander the streets of Limassol’s old town. On the south coast of Cyprus, the city of Limassol is built around the old town. It is a delicious maze of winding streets that surround Limassol Castle. It is definitely worth a climb to the top to enjoy the views and the Old Harbour, before stopping for some fresh food in the Municipal Market.

The Museum of Underwater Sculpture Ayia Napa (MUSAN)

An underwater forest and 93 sculptures make up the first underwater sculpture park, by artist Jason deCaires Taylor

Cyprus has become home to the world first subaquatic museum; the Museum of Underwater Sculpture Ayia Napa (MUSAN).

The project, which cost €1 million to bring to life, boasts 93 sculptures created by Jason deCaires Taylor, whose previous work also includes projects such as the Molinere Bay Underwater Sculpture Park in Grenada and Mexico’s Isla Mujeres National Marine Park.

MUSAN’s underwater forest, located off the coast of Pernara, Ayia Napa in Cyprus, includes spectacular artworks which represent trees and children playing in the woods. Divers and snorkellers can swim through the underwater museum and enjoy the sea life that the project attracts; the structures are 8-10 metres deep and sit in crystal clear waters.

The whole project refers to the latest contemporary issues of our era, such as habitat loss and pollution, whilst having a positive outlook for the future by projecting the hope that what mankind has done can be reversed. Not only is MUSAN designed as a museum, but it is a re-wilding project. Only approximately 10-15% of the seabed has a solid enough substratum to allow reefs to form naturally, so artificial replacements can significantly help underwater conservation.

The sculptures are made from inert pH neutral materials that attract marine life and have been placed at different depths designed to allow natural growth and algae to settle on the surface. This creates homes and food sources for other marine life.

Taylor has spent 2 to 3 years working on the project and explains: “It’s about inspiring people to watch what’s going on, to hold people responsible for how our world is changing and to try and affect a better outcome”.

Visits to the museum can be booked via local dive centres and can be found just a few hundred metres from Ayia Napa’s Pernera beach, within the Ayia Napa Artificial Reef Marine Protected Area (MPA).

Cyprus has rapidly become one of Europe’s top hotspots for expatriates. Why? The island offers a warm climate, good infrastructure, convenient geographic location, is a member of the EU, and offers a very attractive tax incentives for individuals, namely the Cyprus non-dom tax regime. What more could you want?

The island is dotted with incredible beaches, and it is not hard to find your own hidden gem, it is family-friendly due to the very low crime rate and has one of the best laid back lifestyles for those seeking the ‘ideal balance’. There is also an abundance of good restaurants and taverns and a cultural events calendar that will keep you entertained all-year round.

On top of that, Cyprus offers those who relocate to the sunny island an excellent private healthcare sector (with both public and private hospitals), a high quality of education, a low cost of living, and a reasonably priced real estate sector.

And what about the advantageous Cyprus non-dom tax regime?

This truly is the cherry on top of the cake. The Cyprus non-domicile tax regime allows Cypriot non-domiciliaries to benefit from a zero rate of tax on interest and dividends, even if the income has a Cyprus source or is remitted to 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.

In addition, there are NO wealth and NO inheritance taxes in Cyprus, and a low rate of tax on foreign pensions. The first €3,420 of a pension from employment outside of Cyprus is tax free, and individuals can elect to pay only 5% income tax on pension income in excess of this amount.

But it doesn’t stop there. There are additional beneficial features of the Cyprus tax system for individuals. This year (July 2022), an income tax reduction for new residents in Cyprus was introduced. A 50% exemption for income in relation to the first job or employment in Cyprus is available for individuals with annual income in excess of €55,000 (the previous threshold was €100,000). This exemption is available for a period of seventeen years.

For more information on the standard Income Tax rates in Cyprus, please refer to our article: What are the Main Benefits Offered by the Cyprus Non-Dom Regime?

So how to relocate to Cyprus?

Non-EU individuals wishing to move to Cyprus can apply for a Permanent Residence Permit which is useful as a means to ease travel to EU countries and organise business activities in Europe. Applicants must make an investment of at least €300,000 in one of the investment categories specified in the programme, and prove they have an annual income of at least €30,000 (which can be from pensions, overseas employment, interest on fixed deposits, or rental income from abroad) in order to apply for permanent residence. If they choose to reside in Cyprus for seven years, in any ten-calendar year period, they may be eligible to apply for Cyprus citizenship by naturalisation.

Find out more about the various investment categories here: Benefits, Financial Obligations, and Additional Criteria of the Cyprus Permanent Residence Permit.

Alternatively, a temporary residence permit can be obtained by establishing a foreign investment company (FIC). This kind of international company can obtain work permits for relevant employees and residence permits for family members. Again, a key advantage is that after residing for seven years in Cyprus, within any ten-calendar year period, third country nationals can apply for Cyprus citizenship.

Additional Information

If you would like more information about relocating to Cyprus, I would be delighted to meet with you, or arrange an online call. Please feel free to get in touch with Katrien de Poorter in our Cyprus office: advice.cyprus@dixcart.com.

The Cyprus Start-Up Visa Scheme allows entrepreneurs (individuals and/or a team) from countries outside the EU and outside the EEA, to enter, reside, and work in Cyprus in order to establish, operate, and develop a start-up business.

The core goal of the Cyprus start-up visa scheme is to allow talented, non -EU entrepreneurs from countries located outside the EU and outside the EEA to reap the benefits of residing and working in Cyprus, whilst the island benefits from the development of these innovative new businesses. There are two main schemes: (1) the Individual Start-up Visa Scheme; and (2) the Team Start-up Visa Scheme.

Category 1: Individual Start-Up Visa Scheme

An individual start-up visa in Cyprus is granted to any non-EU national who:

• Is the sole founder of the start-up and meets the Enterprise’s requirements, namely:ate.
  • The enterprise must be innovative, based on the criterion that its research and development cost represents at least 10% of its operating costs in at least one of the three years preceding the submission of the application, as certified by an external auditor. In the case of a new enterprise without any financial history, the evaluation will be based on a Business Plan that must be submitted to the Ministry of Finance;
  • The Business Plan must provide for head offices in Cyprus (which may be co-working spaces or co-location with other entities) and tax domicile of the enterprise in Cyprus.

Category 2: Team Start-up Visa Scheme

The second type of entrepreneur’s visa applies to any team of non-EU nationals, who:

• Companies
• of a maximum of five founders of the start-up or at least one founder and other senior executives (which should be senior management), and which should total no more than five individuals;
• The above team must possess more than 50% of the company’s shares;
• The founder has access to €10,000. In case of two or more founders, the total capital must be €20,000, which may include venture capital funding, crowdfunding, or other sources of funding;
• At least one of the team members holds an undergraduate or an equivalent professional qualification.

Benefits of the Start-up visa scheme

The individuals and team members who will be approved in the Individual Scheme will benefit from:

• The right to economic activity and residence in the Republic for one year, and with the possibility of renewal for at least another year,
• Right to self-employment or right to paid employment in his/her registered company within the Republic,
• Prospective residence in the Republic without any maximum time restrictions, if the enterprise succeeds, Enjoyment of family reunification, if the enterprise succeeds,
• Prospective recruitment of specific number of personnel from non-EU countries without prior approval from the Department of Labour, if the enterprise succeeds*.

*Success or failure will be assessed at the end of the second year.

Due to amendments to the Income Tax Law there are special tax incentives for individuals who are investing in innovative companies. The investor is considered to be an independent investor if she or he is not already a shareholder of the company, except in the case of a newly established company where the private investors, including the founders, are acting independently from the company.

There are several investments liable to a tax reduction:

• Capital investments,
• Investments in debt instruments,
• Loans,
• Follow-on investments

The tax reduction will not be greater than 50% of the taxable income of the investor during the year that the investment takes place. In case the tax deduction (max 50% of the taxable income of the investor) exceeds €150,000, the reduction shall be carried forward and shall be implemented during the five years following the investment, providing the amount of the reduction is not greater than €150,000 per year.

Procedure and time-frame

An application form for the establishment/operation/development of a start-up business must be submitted to the Ministry of Finance together with a Business Plan and bank statements to verify that the applicant has access to €20,000, plus other supporting documentation.

The Business Plan evaluation is based on 5 criteria, detailed below and which is scored from 0-3; a score of at least 11/15 is required for approval: significant international market with upward trends, high-growth business with an innovative and expandable business model, a clear and sustainable competitive advantage, a management team, and intellectual property protection. The evaluation process will be completed within five weeks. In the case of a positive evaluation, the applicant will receive a Notification of Initial Approval, which grants the right of business activity for two years.

After the Notification of Initial Approval has been issued, applications for relevant visas must be submitted within six months, to the Consular Authority of the Republic or to the Department of Civil Registry and Migration. The application will be reviewed within three weeks.

Subsequently, an application for a work and residence permit must be filed with the Department of Civil Registry and Migration in Cyprus. The application will be reviewed within a period of three weeks.

Additional Information

Dixcart Cyprus can assist with the incorporation of an ‘innovative’ company. We can provide management services, payroll, accounting, and tax compliance services. We can also provide advice regarding the preparation of the documents required for the application. Please contact us: advice.cyprus@dixcart.com.

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 Katrien de Poorter: 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.

Background

On the 31 January 2020, the UK withdrew from the EU and the implementation of the Withdrawal Agreement, which is legally binding for all Member States, was applied on 1 February 2020. The Withdrawal Agreement allows a transition period from 1 February 2020 until 31 December 2020. 

Status for UK Citizens in Cyprus or Wishing to Move to Cyprus

The implementation of the Withdrawal Agreement means that:

1. UK nationals and their family members who, have been continuously resident in Cyprus for five years, by 31 December 2020, will be eligible for permanent residence.

UK nationals and their family members, who are covered by the Withdrawal Agreement (UK nationals and their family members who have already exercised, or will exercise their free movement rights in Cyprus before 1 January 2021), will be able to continue living in Cyprus with the same access to work, study, benefits and public services that they have enjoyed up to the end of 2020, subject to the specific provisions provided for in the Withdrawal Agreement.

• UK nationals and their family members that are already residing in Cyprus, or who arrive by 31 December 2020, but will not have been continuously resident in Cyprus for five years, will be eligible for temporary residence. This will enable them to stay in Cyprus for five years, and then they will be entitled to apply for permanent residence.

• UK nationals who want to relocate to Cyprus after the 31 December 2020, the end of the transition period and whose rights do not fall within the scope of the Withdrawal Agreement, will need to meet Cyprus immigration rules for third country nationals.

Documentation and Procedures

UK nationals and their family members will not need to replace their pre-existing residence documents: MEU1, MEU2, MEU3, in order to obtain the new residence document that will be issued from 1 January 2021. After the transition period, UK nationals and their family members who are covered by the Withdrawal Agreement, will have the right to receive, if they choose to, a new residence document which will include a statement that it has been issued in accordance with the Withdrawal Agreement.

Residence applications which are submitted after 31 December 2020 by UK nationals and their family members, who are covered by the Withdrawal Agreement (meaning that the applicant has already exercised or will exercise their free movement rights in Cyprus before 1 January 2021), will be issued with forms: UK1, UK2 or UK3.

Applications must be submitted to the Civil Registry and Migration Department of Nicosia, or to the District Unit of the Aliens and Immigration Service of the Police, depending on the area (province, district) where the applicant decides to have his/her place of residence.

Other Countries in the EU

Arrangements regarding the status of UK citizens living in EU countries, varies on a country by country basis. For countries other than Cyprus, please seek professional advice or speak to Dixcart regarding the precise status in Malta and Portugal: advice@dixcart.com.

Additional Information

Dixcart can assist with residence applications in Cyprus before and after 31 December 2020.  The key criteria in terms of applying for residence documentation is that the main applicant must be resident in Cyprus before the end of the transition period.

For more information, please contact Katrien de Poorter in the Dixcart office in Cyprus: advice.cyprus@dixcart.com, or get in touch with your usual Dixcart contact.