Author: Robert Homem

Cyprus Is One Of Europe’s Top Hotspots And Is Considered An Ideal Destination For Permanent Residence 

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.

The process is simple: applicants must make an investment of at least €300,000 in one of the investment categories required under 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). 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.

Alternatively, in order to encourage new businesses to the island, Cyprus offers temporary visa routes as a means for individuals to live and work in Cyprus:

  • Establishing a Cyprus Foreign Investment Company (FIC): work permits can be obtained for relevant employees, and residence permits for them and family members. After residing for seven years in Cyprus, within any ten-calendar year period, third country nationals can apply for Cyprus citizenship.
  • Business Facilitation Unit: visas for highly skilled third country nationals – the Ministry of Finance announced in 2022, that they are introducing the Business Facilitation Unit to assist highly skilled third country employees with a minimum gross salary of €2,500 per month, to gain work permits in Cyprus. These permits will last up to three years.
  • Establishment of a small and medium sized Innovative Enterprise (Start-up visa): 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.

This visa is available for one year, with the option to renew for another year.

It is common for high-net-worth individuals to relocate to Cyprus for employment purposes. If the Permanent Residence Permit or the temporary permits are not the right route for you and/or your family, Cyprus offers another alternate way to live and work in Cyprus:

  • Digital Nomad visa: non-EU nationals who are self-employed, salaried, or on a freelance basis can apply for the right to live and work in Cyprus remotely, for up to one year. The visa can be renewed for another two years.

If you are considering relocating to Cyprus, please get in touch – I would be delighted to speak with you: advice.cyprus@dixcart.com.

Publication

15 March 2023

Reference

IN896

Several Reasons To Take Advantage of The Cyprus Non-Domicile Tax Regime

Moving to Cyprus – The Benefits for Individuals and Key Advantages of Cyprus

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 Robert Homem or Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Publication

5 August 2022

Reference

IN680

Another Reason to Choose Cyprus – The Cyprus Non-Domicile Regime

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 Robert Homem at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Publication

5 August 2022

Reference

IN467

Three Routes For Non-EU Citizens to Gain Residence in Cyprus

The Cyprus Investment Programme and the Benefits

Background

Cyprus offers three options for non-EU nationals to acquire residence. Each of these residence routes offer the additional advantage of leading to Cyprus citizenship, as long as the relevant criteria are met.

The three routes are:

  • Permanent Residence Permit
  • Temporary Residence Permit through the establishment of a Foreign Interest Company
  • Temporary Residence Permit through the establishment of a Small and Medium Sized Innovative Enterprise (“Start-up Visa”)
  • PERMANENT RESIDENCE PERMIT

Cyprus has been a member of the European Union since 2004 and in order to attract additional foreign investment the Cyprus government introduced the Permanent Residence Permit scheme. Through this programme, non-EU nationals can guarantee their residence in the EU.

Requirements

The requirements for the Cyprus Residence Permit scheme are:

  • Make an investment of at least €300,000, in one of the following investment categories:
    • Purchase residential real estate (house/apartment) by a Land Development company in Cyprus, which should relate to a first sale of at least €300,000 (excluding VAT). At least €200,000 must be paid as the Sale Contract is signed and prior to the application for the Permanent Residence Permit.
    • Investment in real estate (excluding houses/apartments): Purchase other types of real estate, such as offices, shops, hotels, or related estate developments of a combination of these, with a total value of €300,000 (excluding VAT). Re-sale properties are acceptable.
    • Investment of at least €300,000 in the share capital of a Cyprus company, which is based and operates in Cyprus, has substance in Cyprus, and employs at least 5 people in Cyprus.
    • Investment of at least €300,000 in units of a Cyprus Investment Organisation of Collective Investments (type AIF, AIFLNP, RAIF).
  • Provide evidence of a secure annual income of at least €30,000. This required annual income, increases by €5,000 for every dependant person, and by €8,000 for every dependant parent or parent-in-law.

Other Criteria

The residence permit does not allow the applicant and his/her spouse to undertake  any form of employment in Cyprus.

Residence permit holders are however permitted to own Cyprus companies and to receive dividends.

Holders of the residence permit must visit Cyprus once every two years.

A clean criminal record, issued by the authorities of the country of existing residence, needs to be provided upon submission of the application.

Family Members

Residence permits can also be issued to the investors’ spouse and all financially dependant children. The applicants’ parents may also be granted a permit.

The Option of Cyprus Citizenship

If the holder of a Permanent Residence Permit resides in Cyprus, this may make them eligible for Cyprus citizenship by naturalisation.  Such a residence permit holder would need to reside in Cyprus for seven years, in any ten calendar year period.

  • TEMPORARY RESIDENCE PERMIT VIA THE ESTABLISHMENT OF A FOREIGN INTEREST COMPANY

Key Features of a Cyprus Foreign Investment Company

A Cyprus Foreign Investment Company (FIC), is an international company which can employ non-EU nationals in Cyprus. Such a company can obtain work permits for relevant employees and residence permits for their family members.

Main Criteria

The main criteria for a Cyprus FIC are:

  • The third country shareholder(s) must own more than 50% of the total share capital of the company.
  • The third country shareholder(s) must contribute at least €170,860 to the share capital of the company. This investment can be used, at a later date, to fund future expenses incurred by the company when it is established in Cyprus.

Main Advantages

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.

In the shorter term:

  • FICs can employ third country nationals, who can apply for appropriate residence and work permits, each of which will be valid for up to two years and are renewable.
  • Employees can exercise the right for their families to join them in Cyprus.
  • The corporate tax in Cyprus is at a competitive level of 12.5%.
  • A Cyprus FIC can also apply for the Notional Interest Deduction Regime, which reduces corporate taxation, by treating new equity in the same way as debt. Please contact Dixcart for more information: advice.cyprus@dixcart.com
  • Cyprus has Double Tax Agreements with almost 60 countries.
  • Dividend income is exempt from corporate and individual taxation
  • Dividend distribution to shareholder(s), is exempt from withholding tax.
  • TEMPORARY RESIDENCE PERMIT VIA THE ESTABLISHMENT OF A SMALL AND MEDIUM SIZED INNOVATIVE ENTERPRISE (START-UP VISA)

The Cyprus ‘Start-up Visa’

The Cyprus Start-up Visa Scheme allows entrepreneurs (individuals or in a team), from third 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.

Who Can Benefit from the Scheme?

  1. Individuals

Non-EU country nationals who are the founders or owners of an enterprise that meets the following requirements:

  • the enterprise must be innovative – research and development costs must  represent 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 that the enterprise’s head office and tax domicile will be established in Cyprus.
  • Teams

Team consisting of non-EU nationals:

  • Founders that consist of a maximum of five individuals, or at least one founder plus other senior executives, up to a maximum of five individuals. The senior management must be to C-suite level employees (managers).
  • The team must own more than 50% of the company shares.
  • The founder must have access to a minimum €10,000. Where there are more than two founders, the total capital must be a minimum €20,000.
  • At least one of the team members holds an undergraduate or equivalent professional qualification.

The requirements mentioned above, relating to individuals and the enterprise criteria, also apply to team applications. 

What are the Benefits of the Start-up Visa Scheme?

  • Individuals and team members, approved under the Start-up Visa Scheme, will benefit from the right to undertake economic activity and to  reside in Cyprus for one year, with the option of renewing this for at least another year.

They have the right to self-employment and/or the right to paid employment in the company registered under the Start-up Scheme in Cyprus, with the prospect of permanent residence in Cyprus, as long as the business ‘succeeds’. Additional family members can move to Cyprus and a specified number of individuals from non-EU countries, can be employed, without prior approval from the Department of Labour, again assuming the success of the business. Success or failure of the business, will be assessed at the end of the second year of trading.

  • Amendments to the Income Tax Law mean that there are special tax incentives for ‘natural persons’ who are investing in innovative companies.

The type of investment subject to the tax reduction include: the capital investment, investment in debt instruments, investment in loans, follow-on investments. The tax reduction can be up to a maximum 50% of the investor’s taxable income in the year that the investment takes place. The amount of the tax reduction cannot be greater than €150,000 per year. It is possible for the tax reduction to be carried forward and enjoyed anytime during the five years following the investment.

Additional Information

If you require any further information, please contact Robert Homem or Katrien de Poorter, in the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Publication

22 February 2021

Reference

IN698

Country/Countries

Living in Cyprus.

For further information

Please contact Katrien de Poorter.

Tax Residency Rule: New “60 Day” Rule for Individuals in Cyprus

New “60 Day” Tax Residency Rule for Individuals in Cyprus

In July 2017, the Cyprus Parliament voted for a new tax residency rule in the form of an amendment to the current criteria used to determine Cyprus tax residency. In addition to the 183 day rule, a second test is being introduced in relation to an individual’s tax position in Cyprus.

The  current “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 will be implemented whereby an individual will be able to become Cyprus tax resident in 60 days. This new tax residency rule will be applicable to individuals who do not spend more than 183 days in Cyprus or in any other jurisdiction. It is anticipated that this amendment will be effective retrospectively as from 1 January 2017 (the start of the Cyprus tax year).

Criteria to be Met for an Individual to be Considered Cyprus Tax Resident in 60 Days:

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.

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.

Cyprus Tax Rules

Cyprus tax rules also apply to tax resident non-domiciled individuals.

The key tax benefits are:

  • a zero rate of tax on interest
  • a zero rate of tax on dividends

How Can Dixcart Help?

Dixcart can help individuals to assess their tax position under the new rules and can provide advice regarding the action that needs to be taken.

Find out more about Living in Cyprus.

Publication

29 October 2019

Reference

IN485

Country/Countries

Living in Cyprus.

For further information

Please contact Katrien de Poorter.

The Cyprus Start-Up Visa Scheme – An Attractive Scheme for Technological Entrepreneurs from Non-EU Countries

Cyprus is already attracting global technology companies from all over the world, especially from EU countries, due to relatively low operational costs and its competitive EU-approved regimes for non-domiciled individuals. In addition, entrepreneurs from the EU do not require a resident visa to reside in Cyprus.

In February 2017, the Cypriot Government established a new scheme designed to attract Non-EU nationals specialised in the fields of innovation, and research and development (R&D) to Cyprus.

The Start-up Visa Scheme

The Cyprus Start-up Visa Scheme allows talented entrepreneurs from outside the EU and EEA to enter, reside and work in Cyprus in order to establish and operate a start-up company themselves or as part of a team, with a high growth potential. The aim of establishing such a scheme was to increase the creation of new jobs, promote innovation and research, and enhance the business ecosystem and economic development of the country.

The scheme consists of two options:

  1. Individual Start-up VISA Plan
  2. Team (or Group) Start-up VISA Plan

A start-up team can consist of up to five founders (or at least one founder and additional executive/managers who are entitled to stock options). Founders who are third country nationals must own more than 50% of the shares of the company.

Cyprus Start-up Visa Scheme: Criteria

Individual investors and groups of investors can apply for the scheme; however, in order to obtain the required permits, applicants must meet certain criteria:

  • The investors, whether they are an individual or a group, must have a minimum start-up capital of €50,000. This can include venture capital funding, crowdfunding or other sources of funding.
  • In the case of an individual start-up, the founder of the start-up is eligible to apply.
  • In the case of group start-ups, a maximum number of five individuals are eligible to apply.
  • The enterprise must be innovative. The enterprise will be considered innovative if its research and development costs represent at least 10% of its operating costs in at least one of the three years preceding the submission of the application. For a new enterprise the evaluation will be based on the Business Plan submitted by the applicant.
  • The Business Plan must stipulate that the organisation’s head office and tax residency will be registered in Cyprus.
  • Exercise of the management and control of the company must be from Cyprus.
  • The founder must hold a university degree or an equivalent professional qualification.
  • The founder must have a very good knowledge of Greek and/or English.

Benefits of the Cyprus Start-up Visa Scheme

Approved applicants will benefit from the following:

  • The right to reside and work in Cyprus for one year, with the opportunity to renew the permit for an additional year.
  • The founder can be self-employed or employed by their own company in Cyprus.
  • The opportunity to apply for a permanent residence permit in Cyprus if the business succeeds.
  • The right to hire a specified maximum number of staff from non-EU countries, without prior approval by the Department of Labour in the event that the business is a success.
  • Family members may join the founder in Cyprus if the business succeeds.

The success (or failure) of the business is determined by the Cyprus Ministry of Finance at the end of the second year. The number of employees, taxes paid in Cyprus, exports and the extent to which the company promotes research and development will all have an impact on how the business is evaluated.

How Can Dixcart Help?

  • Dixcart has been providing professional expertise to organisations and individuals for over 45 years.
  • Dixcart has staff located in Cyprus who have a detailed understanding of the Cyprus Start-up Visa Scheme and the benefits of establishing and managing a Cyprus company.
  • Dixcart can assist with applications for relevant Cyprus Permanent Residence Programmes if the start-up business succeeds. We can draft and submit the relevant documents and monitor the application.
  • Dixcart can provide on-going assistance in terms of accounting and compliance support in organising a company established in Cyprus.

Additional Information

For more information on the Cyprus Start-up Visa Scheme or establishing a company in Cyprus, please contact the Cyprus office: advice.cyprus@dixcart.com or speak to your usual Dixcart contact.

Publication

22 June 2018

Reference

IN533

Country/Countries

Living in Cyprus.