How and why to become Cyprus tax resident?

If you to significantly reduce your tax burden, secure a safe haven for yourself and your family in case of unforeseen situations at home and obtain a European passport for travelling without visas, the Republic of Cyprus is one of the most attractive second citizenship solutions.

4 benefits of Cyprus tax system

1. Less taxes

Some taxes that can put a significant strain on your wallet in other countries, simply do not exist in Cyprus. There are no property tax, gift and inheritance taxes, nor is there capital gains tax on dividends and sale of securities.

2. Tax allowances and reliefs

Special tax rates on a part of foreign income, 20% less tax charged on rental income and other income tax allowances for new residents. One of them is the tax-free allowance of €19,500 of your annual income.

3. Transparency

The EU has no more issues with the Cypriot taxation and companies registered there cause no more suspicions. Besides, Cyprus’s tax system is becoming more transparent thanks to the information exchange regulations which will free your assets of any issues.

4. Pro-business environment

Cyprus offers one of the lowest corporation tax rates at 12.5%. There are several relief schemes for companies similar to the ones for individuals.

In order to benefit fully from the Cypriot taxation system, you will need expert support from a financial adviser that knows local laws first-hand.

How to become tax resident in Cyprus?

For Cyprus, like for many other countries, it has been normal to use the rule of 183 days. By spending that amount of time in the island you would automatically become tax resident in Cyprus irrespective of whether you hold a Cypriot passport or not.

In 2017, the government simplified the procedure of becoming tax resident there. Now you can become resident in Cyprus for tax purposes when you:

1. Have spent at least 60 days in Cyprus in a tax year in question.

2. Are not considered tax resident of another country in the same tax period.

3. Have not spent more than 183 days in any other jurisdiction during the same year.

4. Work or do some commercial activities in Cyprus, for example act as director of a company incorporated on the island.

5. Have a permanent residence permit.

Applying for a second passport in Cyprus

After becoming tax resident in Cyprus, you will be able to use all the opportunities and benefits to optimise your taxes. However, you must legally spend enough time on the island.

One way is to get a residence permit, but it will cost you extra time and money every time you will need to extend it.

Therefore, if you look at Cyprus not just as a safe haven, but a safe holiday destination for the whole family and even as a place to live, you might want to consider obtaining Cyprus citizenship by investment. For example, in return for purchase of residential or commercial property.

This way you will get Cyprus residence permit in two weeks and a European passport in six months. A Cypriot passport allows you to live in any EU country and travel the world without visas.

Like with tax optimisation, application for second citizenship requires a lot of admin and paperwork as well as knowledge of local legislation. Your best decision would be to contact qualified immigration lawyers or a respectable legal firm where you will be offered a comprehensive solution both for your finances and immigration purposes.