Will I Pay Tax as a Cyprus Citizen?
Many people wonder how dual citizenship will affect their global tax liability.
If you are a Citizen of Cyprus, here are 3 common scenarios and their tax implications:
CASE STUDY 1 Mr. Mansour is a 35-year-old man who has acquired Cyprus Citizenship through investing €2 million in various residential properties in Cyprus. He lives in Dubai but collects rent on his Cyprus properties. He visits Cyprus a couple of times a year with his family for no more than 14 days in a calendar year. Will Mr. Mansour pay tax on his global income? No. Because Mr Mansour spends less than 183 days in a calendar year in Cyprus he is deemed a Non-Tax Resident of Cyprus and pays tax on his Cyprus sourced income only. Will he pay tax on his rental income in Cyprus? Yes. All rental income generated in Cyprus,after the allowance of all applicable deductions, is taxed at the normal income tax rates. The first €19,500 of individual income is tax-free and the rates then increase progressively from 20% - 35% based on how much income you receive.
CASE STUDY 2 Mr. Eli is a 65-year-old man who has acquired Cyprus Citizenship through investing €2 million in a residential villa in Cyprus. He retired last year and has since made Cyprus his primary home. He has worked for much of his life in the Gulf and still has a stake in several businesses abroad from which he receives dividends and he has savings that generate interest. Will Mr. Eli pay tax on his global income? As Mr. Eli lives in Cyprus for more than 183 days in a calendar year he is deemed a Tax Resident of Cyprus and pays tax in Cyprus on his worldwide income However, as he does not have his domicile of origin in Cyprus and he has lived out of Cyprus for 17 out of the past 20 years, he is considered to be Non Cyprus domiciled Mr. Eli will pay 0% tax on income received from dividends or interest for the next 17 years. As he generates no other income in Cyprus he will also pay 0% income tax.
CASE STUDY 3 Mr. Nicholas is a 40-year-old citizen of Cyprus since birth. He has lived on the island all his life with his family. Mr. Nicholas is a salaried employer of a local bank. He also has business interests abroad from which he earns dividends. He has savings in Cyprus that generate interest and owns a holiday home in Cyprus that he rents out when he is not using it. Will Mr. Nicholas pay tax on his salaried/rental income in Cyprus? Yes. As Mr. Nicholas spends more than 183 days in Cyprus he is considered a Tax Resident of Cyprus. Further, as he has his domicile of origin in Cyprus and he has lived in Cyprus all his life, he is considered Cyprus domiciled. He will pay income tax on the salary he receives from his job. The first €19,500 of individual income is tax free and the rates then increase progressively from 20% - 35%. Mr. Nicholas will pay an additional 3% on 75% of his gross rental income as a Special Contribution to the Defence Fund (SDC). Will Mr. Nicholas pay tax on dividends earned from his foreign business interests? Yes, he will pay 17% SDC tax., as he is a Cyprus tax resident and domiciled in Cyprus.. Will he pay tax on interest earned on savings in Cyprus? Yes, he will pay 30% SDC tax on interest earned, whether in Cyprus or abroad, as he is a Cyprus tax resident and domiciled in Cyprus. Call us on +971 4 554 1449 or email [email protected] and we will be happy to guide you on your Cypriot Citizenship by Investment application. When processing applications for citizenship we work closely with knowledgeable local advisors to ensure your investment is future proof.
Thinking of investing in real estate in Cyprus but wondering whether you should buy a property as an individual or through setting up a Cypriot company?
Businesses based in Cyprus are subject to a 12.5% tax – one of the lowest in the EU. However, due to many generous exemptions and deductions, the effective Corporate Tax rate can go as low as 2.5%.
Stay tuned to follow up posts on passpro.co where we will be exploring this and related topics in greater detail and follow us on LinkedIn, Twitter @PassProNews, Instagram @PassProCitizenship or Facebook/PassProCitizenship
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