Most of the foreign entrepreneurs choose the impressive low tax jurisdiction in Cyprus which is under the non-domicile status. Cyprus, an EU state member country, is an attractive tax destination for both high net worth individuals and companies. They use it as a place for their business transactions and for family relocation.
The new 60 days or the previous 183 days rule allows any nationality to apply for the Non-Dom Tax Residency. It is a requirement for the Cyprus tax resident to pay taxes in Cyprus on his or her worldwide income under the said rule.
An individual is a Cyprus tax resident if he or she spends more than 183 days in the country. Also, the new 60 days rule can be an additional application for individuals who want to have the non-domicile status.
Benefits on income and exemptions::
- Profits from the sale of securities such as bonds, shares, debentures and others is an exemption of the Cyprus’ taxation.
- No withholding tax on the repatriation of income as royalties, interests and dividends.
- For the first 10 years, there is an exemption of 50% of remuneration from the employment in Cyprus. This rule applies for individuals who were not tax residents prior to the commencement of the employment and given that the annual remuneration is over €100.000.
- An exemption of income tax to any individual who gets an employment outside of Cyprus – from a foreign permanent establishment of a Cyprus tax resident employer for more than 90 days overall in a tax year.
- No gift tax, wealth tax, estate duty or inheritance tax
- Low social insurance contributions
How is the 60 days rule applied?
This rule is attractive to entrepreneurs, investors and international high-earning employees, remote freelancers and even artists.
An individual who in the relevant tax year:
a. is not residing in any other country for a time period of more than 183 days in total and
b. does not have a tax residency in other country and
c. resides in Cyprus for at least 60 days and
d. has different other Cyprus ties such as:
- employment’s contract
- he or she is a business owner
- he or she is a director of a Cyprus Tax resident company
For both 60 and 183 days rules, the days count in and out of Cyprus territory are count as below.
- The day of departure from Cyprus counts as a day of residence outside Cyprus.
- The day of arrival in Cyprus counts as a day of residence.
- Same day departure and arrival from Cyprus counts as a day of residence in Cyprus.
Cyprus has DTTs or Double Taxation Treaties with over 60 countries across the world including the United Kingdom. If you’re an expat resident in Cyprus and your country of origin has a DTT with Cyprus would mean of not being double-taxed on the same income. You will be rather paying tax on your certain incomes either in your country of residence or country of domicile depending on the DTT between the two countries.
The DTT between the United Kingdom and the Republic of Cyprus makes it highly captivating for the British citizens to retire, invest and set up a business in Cyprus. The implementation of the government’s policies is getting great positive impact on Cyprus’ image as a perfect destination for both expats and business relocation.
The final touch was an introduction of “The Non-Domicile Programme” by the government in 2015. The programme targets the foreign entrepreneurs who plan on moving their residence to Cyprus. These are the biggest winners as they see the Cyprus Non-Dom Programme offers a vast fiscal advantages.
The Non-Domicile Programme for Foreign Entrepreneurs and Private Individuals
The main goal of the Cyprus Non-Dom Programme is to have more wealthy private individuals and foreign entrepreneurs reside in Cyprus. This is the step that expects to help in reviving the country’s economic situation and to secure Cyprus’ position as a global business center. The programme offers far-reaching benefits for both wealthy individuals and entrepreneurs from the global setting.
The term “resident but not domiciled” or the Non-Dom Cyprus became a law in July 2015. Any individual who relocates to Cyprus and getting up Cyprus tax residency can mostly qualify as a Cyprus non-domiciled resident. Also, he or she can stay that way for 17 years of residing in Cyprus. Otherwise, those who are tax residents of Cyprus for at least 17 years out of the last 20 years prior to the relevant tax year are the “domiciled in Cyprus”. Their tax position is going to change.
An individual should have a domicile of choice outside of Cyprus. Also, he or she is not a tax resident in Cyprus for the last 20 years prior to the relevant tax year.
Doing Business in Cyprus
A business-friendly country like Cyprus has a good reputation being a global business centre and a gateway into the EU for years.
FinTech companies, IT innovators, creative people, traders, entrepreneurs, etc., find the island as attractive not only with its tax incentives. However, by the comfort of doing business there and by more chances the country offers.
Following the rise of the expat individuals and companies, the whole host of professional services grow quickly in the country. They offer businesses’ great expertise in various kinds of consulting such as the formation of the company, bank accounts, accounting and general management. This is why doing business and establishing a company in Cyprus is advantageous for many kinds of various companies.
The following are the list of the reasons on why incorporating in Cyprus is beneficial to both business owners and entrepreneurs:
- Cyprus has 12.5% in terms of the corporate tax rate and is considered to be one of the lowest.
- It has a simple incorporation process. What you need is to list one shareholder and one director who can be individuals to come up with a unique company name.
- The company’s directors (whether entities or individuals) can be foreign and reside in any place of the world.
- All necessary registration documents can be filed in English.
- Cyprus is a prominent jurisdiction for all types of companies such as security traders, controlled foreign companies and holding companies.
- Opening a bank account in Cyprus is easy after establishing a company. There is no need to appear there physically. This is possible through an eligible introducer who provides a notarized document, needed identification documents and paperwork that are included by the shareholders and the directors.
- This jurisdiction is working with the highly reputable IFRS or the International Financial Reporting Standards.
Cyprus is an ideal place for holdings. Favourable tax legislation has made Cyprus one of the best jurisdictions for holding companies.
Holding a company in Cyprus can take advantage of the following:
- collect dividends at small rates of withholding tax build on its double tax treaty network;
- exclude the incoming dividend from tax subject to some plain conditions;
- disseminate the dividend to its non-resident shareholders (even if they reside in the EU or not or in a country with which Cyprus has a double tax treaty) without any charges of withholding tax in Cyprus.
Moreover, the demolition by a Cyprus company of its underlying shareholding will not bring capital gains tax unless it is a immovable property in Cyprus. As a whole, the reorganization rules offer significant tax planning opportunities and flexibility for revamping via Cyprus.
Personal Income Tax
Personal income in Cyprus is taxed on a tiered basis with quite an essential tax-free allowance of €19,500. Cyprus’ maximum income tax rated based on personal income is presently set at 35% for income in excess of €60,000.
Moreover, there are exceedingly favorable tax conditions for expat retirees in Cyprus, having a 5% flat tax rate on pension income.
Cyprus Non-Dom for Every Budget\
What an individual have to do is register as self-employed in Cyprus or sign up as a well-to-do person. Registering as a self-employed in Cyprus is more interesting because you can do it for as low as €1,250 and this will allow you to enjoy the tax advantages of the non-dom program even without setting up a company.
With the registration, a payment of 14.8% in Social Security on a minimum of € 8,500 is required. It is not advisable to use this registration to invoice much more, as from €19,500 (minimum amount for free of taxes) your income will be advised to progressive taxation of up to 35%.
All in all, Cyprus offers brilliant opportunities both for businesses and individuals. Many foreign entrepreneurs view the country as a perfect connection point between the EU and other trading blocks and countries. Countries like Middle East, Asia and Africa.
Cyprus has an advanced legal, banking and accounting systems, extremely skilled and multilingual manpower. Also, it has a convenient year round flight connections and excellent telecommunication systems. Throwing into its business-friendly tax policies for both individuals and businesses, beautiful beaches and weather will get you to the ideal place in establishing a company in the European Union.