ProACT Sam clarifies new Cyprus tax return obligations for tax residents.
Who needs to complete a Cyprus Tax Return?
A taxable entity could be an individual or a business, a company, a trust, a property or other legally defined taxable entity.
Any Cyprus registered entity has a tax return obligation.
That may be a property or business generating income or gains in Cyprus which would require the non resident beneficial owner of that income or gain to complete a Cyprus tax return.
The big change for tax return rules due in May 2024 for the Cyprus Tax year of 2023 is that all tax residents need to complete a tax return if they have real income – unless they are exempt.
If you have a business, hold an office in a Cyprus company, rent property, or a Cyprus trust, then you must complete a tax return.
Who is a Tax Resident in Cyprus ?
Cyprus has a standard definition of tax residence based upon days in country plus other exemptions to offer tax benefits to Expats as Cyprus Tax Residents
To become a tax resident in Cyprus must first have a resident permit in Cyprus, and a permanent home or business in Cyprus in order to be issued with a Cyprus Tax Number.
Expats can have a resident permit without becoming a tax resident. In 2025 EU Schengen rules will tighten and enforce these rules.
For Cyprus to become an individual’s worldwide tax residence you must spend more than 183 days living in Cyprus during a year. Expats should count their days travelling in or out of Cyprus.
The 60 day tax rules for Cyprus offers Expats the chance to enjoy the benefits of low tax Cyprus while working overseas or travelling.
Tighter rules apply to achieve the additional 60 day Tax Resident Certificate required each year. Only if issued with a 60 Day Certificate can expats use this rule.
Requirements for a 60 Day certificate include not being tax resident in another country or spending more than 183 days in another country.
If you fail to qualify as a Cyprus tax resident then your home country of domicile retains tax rights on your worldwide income.
Expats can have a resident permit for EU Cyprus for longer stays without becoming a tax resident depending upon the days they spend in Cyprus and other countries.
Your home country has rights to your default worldwide tax liability.
Who has to Pay Health Tax GHS?
The changes in Cyprus tax return obligations rules are driven by the Health Tax. Although introduced in 2019 rules are still being adjusted to enforce.
Every Cyprus tax resident has to pay Health Tax GHS on worldwide income – unless they have an exemption.
This includes paying Health Tax on dividends and interest worldwide even if qualifying as non-dom to pay 0% the relevant Special Defence Flat Rate Taxes.
If you pay Social Insurance in Cyprus, Health Tax is paid inclusive and additional tax is not due with the Income Tax Return.
If you have registered a transfer of State Health care cover to Cyprus under reciprocal social insurance agreement then you would be exempt from Health Tax. These are available to state pensioners and temporary short term expats working overseas.
The overseas certificate must be registered in Cyprus to be exempt.
This will result in time with a White Medical Card being issued in Cyprus with a reference number required for the tax return to be exempt from Health Tax.
Even if your total income including pensions is below EURO 19500 Health tax is still payable and a tax return is still due for 2023/2024.
Pensions Paid Overseas
Pensions are taxed at source in the country of origin.
If you receive overseas pensions you could have them taxed in Cyprus only if you register the pension to be taxed as payable from Cyprus at a flat rate tax of 5%.
Note Health tax could also be payable on pension income at 2.65%.
Health Tax Exemption on pension income requires separate state health care transfer of benefits that is only available for state pensions paid from a country with a reciprocal social insurance agreement with the EU and Cyprus.
This includes the UK, Norway and Switzerland.
Pensions paid with no registered state pension would require Health tax payment.
Who Qualifies for Cyprus State Health Care GESY?
Paying Cyprus Health Tax does not qualify you for Cyprus State Health Care GESY.
Only Cyprus Social insurance payers, Expats registered under a reciprocal social insurance agreement or Cyprus citizens qualify for Cyprus State Health Care GESY.
A big change for 2024 currently being updated is that Permanent Resident Status does not now automatically qualify you for GESY as it did up to February 2024.
Tax Returns Now Due for Most.
If you are Cyprus tax resident or a beneficial owner of a Cyprus tax entity, with any real income at all, then no income tax is due under EURO 19500.
However Health Tax is payable on all worldwide income, even if qualifying for non-dom 0% flat rate taxes.
Unless you have exemption for earned income with paid social insurance, or you have a registered transfer of social insurance exemption from another country, then you are required to complete a tax return in Cyprus of worldwide income.
To update residency and tax registrations, contact us at ProACT Partnership.
ProACT Sam Orgill
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