Advantages of Acquiring Tax Residency in Cyprus for Non-Permanent Residents
In the world of offshore planning, Cyprus stands out as a popular destination for individuals seeking tax advantages and financial security. This article will delve into the key aspects of offshore planning in Cyprus, focusing on taxation, residency, and the role of interdisciplinary teams.
Holistic offshore planning in Cyprus is often executed by teams of specialists, including professionals from the fields of offshore finance, law, real estate, accounting, and taxation. These teams collaborate with lawyers, real estate agents, accountants, tax advisors, and company formation specialists to create tailored plans for their clients. However, it is important to note that specific expert names or organizations are not specified in search results.
One of the most appealing factors for offshore planning in Cyprus is its low corporate tax rate. At 12.5%, Cyprus has one of the lowest corporate tax rates in the European Union and one of the best worldwide. This makes it an attractive destination for businesses looking to minimize their tax liabilities.
For individuals, personal income in Cyprus is taxed progressively, with a tax-free allowance of €19,500 per year. There are also exemptions from Special Contribution for Defence (SDC) for certain types of income.
If one is a non-domiciled tax resident of Cyprus, they can enjoy additional tax benefits. For instance, dividend income is tax-exempt in Cyprus, and the authorities do not require the declaration of foreign companies for non-doms.
However, it is generally not necessary to employ a local director for a Cyprus company, but it can be a good idea depending on the case. To avoid the Controlled Foreign Company (CFC) status, one should avoid doing business-related activities in the 60 days they are in Cyprus. A Cyprus company without tax residence in Cyprus cannot use double taxation treaties for income tax exemptions.
To become a Cyprus tax resident, one can follow the 183-day rule or the 60-day rule. The 183-day rule requires spending at least 183 days in Cyprus during the tax year, while the 60-day rule requires living in Cyprus for at least 60 days during the tax year, maintaining a permanent home in Cyprus, not residing in any other country for more than 183 days in a tax year, not being a tax resident in any other country during the tax year, and doing business in Cyprus.
After 17 years, a non-domiciled tax resident will be considered a tax resident and domiciled in Cyprus, and the standard tax rules will apply. It is worth noting that as an expat, taking up Cyprus tax residency qualifies one as a Cyprus non-domiciled resident, allowing a stay of up to 17 years.
Tax residency in Cyprus offers an exemption from taxation on worldwide dividends and passive interest income. This, combined with the low corporate tax rate, makes Cyprus an attractive destination for offshore planning.
Moreover, Cyprus has established treaties with many countries to avoid double taxation. This means that if a Cypriot tax resident receives a dividend from a country with a treaty with Cyprus, they will enjoy tax advantages such as paying lower withholding taxes in these other countries.
Nomad Capitalist offers expertise and real-world experience to help tax residents qualify for tax exemptions, with some clients becoming completely exempt. By registering a private company that provides an employment contract, one can become accountable for Cyprus taxation.
In conclusion, offshore planning in Cyprus offers numerous benefits for individuals and businesses seeking tax advantages. With its low corporate tax rate, exemptions for certain types of income, and the possibility of tax-exempt dividend income for non-domiciled tax residents, Cyprus is a popular destination for offshore planning. Furthermore, the 183-day and 60-day rules provide flexible options for becoming a Cyprus tax resident, and the country's double taxation treaties offer additional benefits for those doing business internationally.
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