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Cyprus Tax - Residency Rules
Information on how to calculate if you qualify as a Cyprus Tax Resident
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You will be regarded as a tax resident in Cyprus if you spend more than 183 cumulative days in Cyprus during the tax year (1st January to 31st December).
The day you arrive in Cyprus counts as a day of residence (even if you leave again later the same day). Days of departure counts are not counted towards the cumulative total even if you come back the same day.
Cyprus takes a split-year approach:
If you arrive in Cyprus later in the year and spend less than 183 days there during that year, you will be tax resident from 1st January of the following year, assuming that you intend to (and do) stay for more than 183 days in that year.
If you arrive on say 30th April and you are in Cyprus for more than 183 days that year, then you will be tax resident from 30th April. If you had a short visit to Cyprus prior to 30th April, then it might be possible and advantageous to claim the earlier date as the start of residence, particularly if it was before 6th April to avoid being regarded as a UK tax resident for the UK tax year between 6th April and 5th April the following year.
UK/Cyprus tax treaty tie-breaker provisions
Where you are regarded as tax resident in both Cyprus and the UK under each country’s domestic laws, there are a series of tie-breaker tests in UK/Cyprus Treaty which will determine in which country you are deemed to be resident.
Each test is considered separately and where your residency can be determined using the first test, all other tests are ignored. If your residency cannot be determined under the first test, then the next test comes into play.
1) The first test is designed to determine in which country you have a permanent home available to you. A ‘permanent home’ is any form of accommodation which is continuously available to you for your personal use, and does not have to be owned by you.
2) Where you have a permanent home available to you in both countries, you are deemed to be a resident of the country with which your personal and economic relations are closer. ‘Personal and economic relations’ is a wide expression intended to cover the full range of social, domestic, financial, political and cultural links. The whole range of these factors is taken into account, but considerations based upon personal acts are given special weight. For example, if you have a home in the UK and set up another in Cyprus while retaining the first, the fact that you have retained your home in the UK, where you have lived, worked and where your family and possessions are, can, together with other factors, go to demonstrate that your personal and economic relations are closer to the UK than Cyprus.
3) If (2) cannot be determined, or if you do not have permanent home available to you in either country, you shall be deemed to be a resident of the country in which you have a habitual abode. This broadly means the country in which, over a reasonable period, you stay more frequently. The comparison must be made over a sufficient length of time for it to be possible to determine whether residence in either the UK or Cyprus has become ‘habitual’.
4) If you have a habitual abode in both countries or in neither of them, you will be regarded as resident in the country of which you are a national. If you are a national of both countries or of neither of them, the competent authorities shall determine the question by mutual agreement.
The level and bases of, and reliefs from taxation may change. Any statements based on taxation are based upon current taxation laws and practices which are subject to change.
This information is for guidance purposes only. You should seek professional advice relating to your personal circumstances and objectives.
© Blevins Franks
Blevins Franks – Integrated Tax Planning and Wealth Management since 1975
Tel: 26 912 315
Last Updated 15 November 2012
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