Little-Known EU Country Offers Tax-Free Living For Foreigners
Making a move to Cyprus is an interesting prospect. Not only is Cyprus one of the sunniest countries in Europe, with more than 300 days of sunshine per year. It also offers unique tax benefits.
The benefits of tax residency in Cyprus are extensive. Cyprus has kept a relatively low profile compared to more popular EU countries offering tax deals like Portugal and Spain. However, Cyprus offers new residents a way to live there tax-free for 17 years.
Move to Cyprus as a Non-Domiciled Resident
Any foreigner who makes a move to Cyprus will almost certainly be classed as non-domiciled. Only Cyprus citizens and foreigners who’ve lived in Cyprus for more than 17 years are considered domiciled.
Everyone has a domicile of origin and a domicile of choice. Your domicile of origin is acquired at birth. So provided you don’t have Cypriot parents or grandparents, you’re unlikely to have a Cypriot domicile of origin.
Domicile of choice is where you choose to make your life. Even though you choose to live in Cyprus, if you have no prior connections to the country, it won’t become your domicile of choice until you’ve spent 17 years living on the island.
All residents of Cyprus are subject to tax on their worldwide income. However, there are special exemptions for non-domiciled residents of Cyprus.
Dividend Income and Interest Income are Tax-Free
Any foreigner who is a Cyprus resident for at least 60 days per year is not subject to income tax on dividends received. If you qualify as non-domiciled in Cyprus, interest payments received are also not taxed in Cyprus. This includes dividends received from your own companies. That means that any income that you control can be passed through an offshore company and paid to you as a dividend. This income will not be taxed in Cyprus.
Low Flat Tax on Pension Income When You Move to Cyprus
If your income comes from a pension, there are special rules when you’re a foreign Cyprus resident too. Overseas pensions are subject to a flat tax of 5%. Anyone moving from a high-tax country is likely to make savings on the current rate their pension is taxed at.
Income from Overseas Employment is Tax-Free
Provided your employer is not a Cyprus-based company, all salaried income from overseas is exempt from tax in Cyprus. If you’re a Cyprus resident working for an overseas employer for more than 90 days per year for a salary, that income is not taxed in Cyprus. This also creates an opportunity to be employed by a company you control while being tax resident in Cyprus. This income will not be taxed in Cyprus.
No Estate Tax for Cyprus Residents
There’s no wealth tax or inheritance tax for residents of Cyprus. There’s no tax on the sale of your home overseas, either. Profit from share sales from selling a business is not taxed in Cyprus, provided the business is outside the country. Income from trusts will be tax-free in Cyprus in most cases. There are also exemptions for those who work with Cyprus companies after moving to the Island.
Cyprus has double taxation agreements with 67 countries, including the US.
Residency Options When You Move to Cyprus
Cyprus offers residency by investment options. You can buy a property for €300,000 when you move to Cyprus and get fast-tracked permanent residency. You’ll only have to visit Cyprus once every two years to maintain it. This type of residency can be fast-tracked in as little as two months. You can also get residency in Cyprus by proving you have a stable monthly income from a pension or investments. The amounts you need to prove are low, at only €9,568 for a single applicant and €4,613 for each dependent. There’s no need for a property purchase with this option.
Cyprus Citizenship is Possible Too
Cyprus used to have a citizenship-by-investment program, where you could get citizenship by making a substantial investment in real estate. This program was canceled at the end of 2020. But there are other ways to become a citizen of Cyprus.
Citizenship by naturalization is possible. After seven years of living in Cyprus for at least six months a year, you can apply for citizenship of Cyprus and be entitled to an EU passport.
Conclusion
Cyprus offers some of the best tax benefits in Europe for foreigners. Provided your affairs are structured properly before you move to Cyprus, you’ll be able to protect all your income from being taxed there. You’ll also be able to enjoy one of the best climates in Europe with year-round sunshine. Living costs are also amongst the lowest in Europe. Cyprus is worth considering if you’re looking for a low-cost, sunny place to live tax-free in Europe.
Move to Cyprus Questions
What are the tax benefits of becoming a Cyprus resident?
Cyprus offers unique tax benefits to residents, including tax-free living for foreigners for up to 17 years. Dividend income and interest income are also tax-free in Cyprus.
Who is considered a non-domiciled Cyprus resident?
Any foreigner becoming a Cyprus resident will be classified as non-domiciled, except for Cyprus citizens and foreigners who have lived in Cyprus for more than 17 years, or anyone with Cypriot parents or grandparents.
Are dividend income and interest income taxed in Cyprus?
No, if you qualify as non-domiciled in Cyprus and are a resident for at least 60 days per year, dividend income and interest income received are not subject to taxation.
How is pension income taxed in Cyprus?
Pension income from overseas is subject to a flat tax rate of 5% for foreign Cyprus residents. This can result in significant savings compared to high-tax countries.
Is overseas employment income taxed in Cyprus?
No, if you’re a Cyprus resident working for an overseas employer for more than 90 days per year, your salaried income from overseas is exempt from taxation in Cyprus.
What are some other benefits of tax residency in Cyprus?
Residents of Cyprus enjoy several additional benefits, including no wealth tax or inheritance tax, no tax on the sale of homes overseas, and tax exemption on profit from selling businesses located outside the country.
What are the residency options in Cyprus?
Cyprus offers residency by investment options, such as buying a property for €300,000 to obtain fast-tracked permanent residency. Alternatively, you can prove a stable monthly income from a pension or investments to qualify for residency.
Can I become a citizen of Cyprus?
Yes, citizenship by naturalization is possible in Cyprus. After living in Cyprus for at least six months a year for seven years, you can apply for citizenship and obtain an EU passport.
Can you help me move to Cyprus?
Yes, Liberty Mundo help clients worldwide get overseas residencies, second citizenships and reduce their taxes to zero or low single digits. We also help with protecting your assets from all predators, no matter how well funded. Click here to find out how to become a client.
