With the latest amendments to the Income Tax and Special Defence Contribution Laws, Cyprus is now considered to be one of the most favourable jurisdictions for personal tax residency. In addition, Cyprus does not have any other personal tax modes such as inheritance or wealth taxes.
The tax regime enhancements tie in with the various investment programmes which aim to attract foreign individuals to Cyprus and bolster the country’s economy.
Cyprus tax residency
In accordance with the provisions of the Cyprus Income Tax Law, an individual can qualify as a tax resident in Cyprus if he/she meets the tax residency criteria.
An individual who qualifies as a tax resident in Cyprus is taxed on income accruing or arising from sources both within and outside Cyprus (i.e. worldwide income).
An individual who does not qualify as a tax resident in Cyprus is taxed on income accruing or arising only from sources within Cyprus (e.g. rental income from real estate property located in Cyprus).
Cyprus tax residency criteria
Tax resident in Cyprus is an individual who:
- is present in Cyprus for a period exceeding 183 days in a tax year (i.e. 1 January to 31 December), or
- does not spend more spend more than 183 days in any other country during the tax year and is not a tax resident in any other country for that tax year and all the following conditions are met:
- he/she spends at least 60 days in Cyprus during the tax year;
- he/she pursues any “business” in Cyprus and/or works in Cyprus and/or is a director in a company tax resident in Cyprus at any time during the tax year, provided that such “business” is not terminated during the year;
- he/she maintains a permanent residence in Cyprus, which can be either owned or rented.
Tax bands and rates
A Cyprus tax resident is subject to tax on his/her taxable income based on the below tax bands and rates:
|0 – 19,500||0||Nil|
|19,501 – 28,000||20||1,700|
|28,001 – 36,300||25||3,775|
|36,301 – 60,000||30||10,885|
Tax exemptions and deductions
The Income Tax Law provides for numerous exemptions/deductions from taxation which are aimed to attract new taxpayers to Cyprus. Of note are the following, amongst others:
- Dividend income is exempt from Income Tax.
- Interest income is exempt from Income Tax.
- Profits from the sale of securities are exempt from Income Tax.
- New taxpayers can earn a discount of 20% on their annual taxable income up to the year 2020 or if they earn remuneration of at least EUR 100,000 from a Cyprus tax resident company, then 50% of their remuneration are exempt from tax for 10 years.
- Any remuneration from salaried services rendered outside Cyprus for more than 90 days in a tax year is exempt from Cyprus Income Tax.
- Lump sum life insurance repayment are exempt from Income Tax.
- A 20% reduction is offered on any rental income received.
Special Contribution for Defence
Cyprus tax resident individuals are also subject to Special Contribution for Defence (“SCD”) if they qualify as Cyprus domiciled tax residents.
An individual is domiciled in Cyprus for the purposes of SCD if:
- he/she has a domicile of origin in Cyprus as per the Wills and Succession Law (subject to conditions), or
- if he/she has been a tax resident in Cyprus for at least 17 out of the 20 tax years prior to the tax year of assessment.
As a result, an individual who does not have a domicile of origin in Cyprus can qualify as a non-domiciled tax resident for at least 17 years from the year he/she qualifies as a Cyprus tax resident, hence being exempted from SDC for the next 17 years.
SCD is imposed (on an accruals basis) on dividend, interest and rental income earned by a Cyprus domiciled tax resident individual.
SCD is imposed based on the following rates:
|Type of income||Rate %|
|Rents (reduced by 25%)||3|
The very attractive Cyprus personal tax regime allows individuals to relocate their personal tax residency to Cyprus and enjoy, for at least 17 years, a full exemption from tax on their worldwide dividend and interest income, and furthermore enjoy a permanent exemption from tax on any gains generated from the disposal of securities, subject to conditions.
We will be more than happy to assist EU and non-EU citizens in obtaining the necessary immigration residence permits in Cyprus as this could be required for registering an individual with the Cyprus Tax Department. With regards to the procedure and requirements for registering an EU citizen with the Cyprus Civil Registry and Migration Department, please refer to the following article ‘Cypriot Residency Permit- Yellow Slip’.
Sterling gets vaccine boost to hit 8-month high vs euro
By Joice Alves
(Reuters) – Sterling rose to a fresh eight-month high against the euro on Wednesday as Britain’s faster COVID-19 vaccine rollout than in the European Union offered support to the pound.
Although Britain’s deaths from the coronavirus pandemic passed 100,000 on Tuesday, its faster initial vaccine rollout has fuelled hopes for economic recovery.
Sterling was up 0.3% at 88.28 pence at 1049 GMT, after hitting a fresh eight-month high of against the single market currency.
Graphic: Sterling 27 Jan, https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrnbbbve/Sterling%2027%20Jan.png
Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said “the general theme of UK doing well with vaccinations is playing a role” in lifting the pound, which is “not expensive and not over-owned yet”.
On the other hand, “the euro is clearly being undermined by ongoing concerns over vaccine rollout speed and supply,” Yu added.
Versus the greenback, sterling was flat at $1.3736, not far off a May 2018 high of $1.3759 touched earlier.
Hopes for a large U.S. fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting sterling. Market participants are expecting Federal Reserve Chair Jerome Powell to renew a commitment to ultra-easy policy.
“It’s FOMC today so the adjustment in dollar positions may be playing a role as well,” Yu said.
As Britain left the bloc in December, the City of London said the capital’s loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the European Union “irrationally” blocks access.
“For now Sterling continues to trade more on hope, vaccines, than current reality,” said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets.
(Reporting by Joice Alves in VARESE, Italy. Editing by Alexander Smith and Andrew Cawthorne)
Dollar advances as investors shy away from risk
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The dollar edged higher against a basket of currencies on Monday, as a burst of volatility in stock markets around the globe sapped investors’ appetite for riskier currencies.
Concerns over the timing and size of additional U.S. fiscal stimulus sent major U.S. stock indexes briefly more than 1% lower before they recovered to trade little changed on the day.
The sharp move in stock markets soured FX traders’ appetite for risk, Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, said.
“Your high beta currencies – currencies that are highly correlated with equity markets and global risk appetites – are tumbling in synchrony with equity indexes,” Schamotta said.
Market sentiment turned more cautious at the end of last week as European economic data showed that lockdown restrictions to limit the spread of the coronavirus hurt business activity.
The U.S. Dollar Currency Index was 0.19% higher at 90.396, after rising as high as 90.523, its strongest since Jan. 20.
The euro was down around 0.28% against the dollar. German business morale slumped to a six-month low in January as a second wave of COVID-19 halted a recovery in Europe’s largest economy, which will stagnate in the first quarter, the Ifo economic institute said on Monday.
The Australian dollar – seen as a liquid proxy for risk – was 0.16% lower against the dollar.
U.S. stocks have scaled new highs in recent sessions even as concerns about the pandemic-hit economy remain. Investors are trying to gauge whether officials in U.S. President Joe Biden’s administration could head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive.
Despite the dollar’s recent rebound – the dollar index is up about 1.3% since early January – analysts expect a broad dollar decline during 2021. The net speculative short position on the dollar grew to its largest in 10 years in the week to Jan. 19, according to weekly futures data from CFTC released on Friday.
The U.S. Federal Reserve meets on Wednesday and Chair Jerome Powell is expected to signal that he has no plans to wind back the Fed’s massive stimulus any time soon – news which could push the dollar down further.
Sterling strengthened on Monday against the weaker euro as Britain’s COVID-19 vaccine rollout over the weekend offered support to the British currency.
(Reporting by Saqib Iqbal Ahmed; Editing by Andrea Ricci and Sonya Hepinstall)
London and New York financial services treated the same, EU says
By Huw Jones
LONDON (Reuters) – An EU forum for discussing financial services with Britain will be similar to what the United States has, and it must be in place before market access will be considered, the bloc’s financial services chief said on Monday.
Britain’s Brexit trade deal with the EU from Jan. 1 does not cover financial services, leaving its City of London financial center largely cut off from the EU.
Both sides are committed to creating a forum for financial regulatory cooperation by March, but talks have not started yet, the EU financial services commissioner told the European Parliament.
“What we envisage for this framework is similar to what we have with the United States, a voluntary structure to compare regulatory initiatives, exchange views on international developments and discuss equivalence related issues,” Mairead McGuinness told the European Parliament.
U.S. and EU regulators took about four years just to agree on rules on cross-border derivatives.
Trading in euro shares has already left London, along with a chunk in swaps trading. That questions the value of any future EU access given that many banks and trading platforms from the UK have opened units in the bloc.
McGuinness said regulatory cooperation will not be about restoring market access that Britain has lost, nor will it constrain the EU’s unilateral equivalence process.
Equivalence refers to EU access when Brussels deems a non-EU country’s rules are similar enough to the bloc’s.
“Once we agree on our working arrangements, we can turn to resuming our unilateral equivalence assessments… using the same criteria as with all third countries, including anti-money laundering and taxation cooperation,” she said.
Britain plans to amend some EU rules.
“The United Kingdom intention to diverge requires a case-by-case discussion in each area. Equivalence and divergence are polar opposites,” McGuinness said.
“I am optimistic that over time, through cooperation and trust, we will build a stable and balanced relationship with our UK friends.”
(Reporting by Huw Jones; Editing by Dan Grebler)
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