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Cyprus Permanent Residency with Tax Advantages

calendar 4/12/2021 8:00:00 AM
author Admin System

It is essential for investors to know what are the advantages of investing in one place instead of another. In the last few years, many European countries have instituted Golden Visa programs catered for investors wishing to live within the EU. However, living in Europe usually comes with hefty taxes. Yet, there’s an excellent RBI program that also allows you to optimize taxes. Of course, we’re talking about Cyprus. 

Looking at the Cyprus RBI program, we can talk about the following advantages:

  • Permanent residency in Cyrus gives you the ability to live in Cyprus year-round, and after Cyprus joins the Schengen zone, you will be able to freely move around the entire Schengen space.
  • Together with the main applicant, members of his/her family will receive permanent residency: his/her spouse, children – including adult children under the age of 28 – and financially dependent parents.
  • Gaining permanent residency in Cyprus through investment in real estate and then staying on the island allows you to receive Cyprus citizenship in seven years.
  • You may be eligible for the Cyprus “non-dom” regime and enjoy significant tax benefits by staying for 183 days on the island per year or 60 days over a year under certain conditions.
  • Obtaining residency by investment and starting a business in Cyprus may generate significant profits for the applicant, thanks to the 12.5% corporate tax rate, one of the lowest in all the EU. Besides, starting a company in Cyprus opens the gates to do business with all the EU countries.

Cyprus is on the rise thanks to the stabilization of its economy and the implementation of pro-business reforms, causing real estate prices to rise for the first time in many years. This has created an environment based on trust and confidence for investors worldwide.

Investing in real estate in Cyprus comes with many benefits. It offers a flow of constant profits and income for years and the possibility of living in the country. Cyprus has one of the lowest costs of living in all the EU, considering its great lifestyle and excellent services. 

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Requirements to acquire the Cypriot Residency by Investment

The Residency by Investment program is open and waiting for anyone wealthy enough to acquire it. Here you will know which are the requirements to apply for the Cypriot Residency.

  • The applicant must purchase a real estate property worth at least €300.000, using funds from a source outside of Cyprus.
  • They must make a €30.000 deposit into a bank in Cyprus. The money will be kept for three years.
  • They must show proof of an annual €30.000 income outside Cyprus. If the applicant is including his/her family, the annual income must include €5.000 for each financially dependent (spouse and children) and €8.000 for each financially dependent parent.
  • The applicant must have a clean criminal record. 

This residency program is a great opportunity for foreign capital holders, especially for non-EU residents. A residency by investment in Cyprus opens the gates for those who want to do business in Europe fast because the application process takes around three months.

Also, applicants are not required to live in Cyprus before or after the approval; permanent residency gives them the ability to live in the country year-round. After Cyprus joins the Schengen zone, the applicant will freely move around the entire Schengen space. Holders of Cyprus permanent residency through real estate investment do not automatically become Cyprus tax residents and are under no obligation to stay in Cyprus.

Moreover, Cyprus’s tax system offers incredible opportunities for those who applied for residency by investment. The country is a great and attractive business target and we are about to see why.

Tax advantages for non-residents

When we study the Cyprus tax system’s advantages, one of the main points of interest is the “non-dom” regime, a tax policy introduced back in 2015. According to this program, tax residents that qualify as non-Cyprus domiciled are exempt from the Special Contribution of Defense (SCD) on their passive income and unconditional tax exemptions on gains of disposals of securities for 17 years. This tax is imposed only on non-exempt dividend income tax, 'passive' interest income tax, and rental income earned by Cyprus tax resident companies.

This is a great advantage for those who have acquired the Cyprus residency by investment and there is a big difference from those who actually are considered “domiciled” on the island. The “domiciled” residents are subject to high-rate taxes, regardless of the income source.

Although other European countries, like UK and Ireland, also have their own “non-dom” program, it comes with heavy and complex bureaucratic barriers that, in the end, bring no benefits at all. In Cyprus, it is all the opposite. Those with a “non-dom” status will enjoy dividends, interest, and rental income free from SDC tax in Cyprus; and a 50% exemption on income tax from employment income if this exceeds €100.000. Applying to this status in Cyprus is relatively easy.

  • The 183-day rule: Cyprus has adopted a residency-based system of taxation, whereby physical presence in Cyprus exceeding 183 days in a tax year (1st January to 31st December) will constitute tax residency for individuals. Therefore, if an individual is physically present in Cyprus for more than 183 days in a tax year, they will be considered a tax resident of Cyprus during this tax year. Consequently, if the individual is physically present in Cyprus for less than 183 days in a tax year, s/he will be considered to be a non-Cyprus tax resident in this tax year.
  • The 60-day rule: As of 1st January 2017, the above tax residency rules have been amended to also provide that an individual who does not stay in any other country, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in Cyprus in this tax year if all of the following conditions are met: i) the individual stays in Cyprus for at least 60 days in the tax year, ii) exercises a business and/or is employed in Cyprus and/or holds an office with a Cyprus tax resident company at any time during the tax year, iii) maintains (by owning or leasing) permanent home in Cyprus.

And besides all the benefits mentioned before, Cyprus has double taxation treaties with approximately 70 countries, which provides great deductions and exemptions on several taxes like dividends, interests, royalties, and retirement funds from foreign sources.

Besides everything we have talked about, Cyprus also offers good deals for those who get employment in the country, being just another argument to relocate your life to this Mediterranean paradise. Individuals who were based overseas and not Cyprus tax-residents before their employment in Cyprus may apply for some exemptions on their income tax. These are: 

  • The 50% exemption rule: This exemption covers those individuals who take up employment in Cyprus with an annual income above €100.000, they will be eligible for an exemption from taxation of 50% of their income period of 10 years, commencing from the year of employment.

The exemption is not given to an employee who was a tax resident in any three out of the five years preceding the year of employment and to an employee who was resident in the year preceding the year of commencement of employment.

  • The 20% exemption rule: For this one, individuals who took up employment in Cyprus and were not tax resident in Cyprus before starting such employment will be eligible for an exemption from taxation of 20% of their income or €8.550 (whichever is lower) from any employment which is exercised in Cyprus. This exemption applies for 5 years starting from 1st January following the year of commencement of such employment and notwithstanding this, it is applied up to and including the year 2020.

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Corporate Tax Advantages in Cyprus

Cyprus, as already said, is in a high moment. It offers excellent opportunities for those who want to settle on the island and for those looking for low-risk, high-margin investment destinations. Besides the Residency by Investment Program, this little country also offers several advantages when you want to settle a company.

For those non-EU residents, Cyprus may be the entrance to European business. Numerous companies have settled in the country mainly attracted by a lax bureaucracy in obtaining financial licenses and significant corporate income tax savings for companies.

Among the advantages of opening a Cypriot company, we can talk about the friendly tax regime for companies, being the lowest tax rate in all the EU, with a 12.5% corporate income tax. Companies are only considered Cypriot Tax Residents if they are managed and controlled within the country. Also, opening a company here facilitates obtaining an intra-community VAT number for doing business in the European Union. Basically, establishing a business in Cyprus allows its owner to do business with all the EU, thus generating big profits.

Last, but not least, offshore companies’ payments are tax-deductible for Cypriot companies as business expenses. Likewise, if the company in Cyprus owns shares of another company, all dividends are tax-free. This is just impressive.

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Cyprus offers an excellent program for investors considering the tax optimization opportunities and the possibility to easily expand to the EU.

Here in Mundo, we want you to be aware of great investment and residency programs worldwide. That is why you really should know about the advantages that Cyprus has to offer.

Contact us and we will offer any help you need for your application. Our experts will happily walk you through each stage of the process. Your Cyprus residency is waiting for you. Start a new life today. 

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