Cyprus is a complex location, providing a climate that is among the best in the Mediterranean, along with a variety of jobs. A secure and laid-back society that is popular among families, and a harmonious lifestyle for retired people.
Cyprus tax system and its deadlines
The governing body is the Cyprus Tax Department, which is tasked to enforce the tax laws on the people, collect taxes. Organise tax treaties with other states and disseminate information to the rest of the people. It is compulsory to file a tax return by all tax residents and those non-tax residents who have a source of income in Cyprus. The tax residents are usually taxed on their global income, except for those who fail to have a domicile in Cyprus. Those who are non-domiciled tax residents of Cyprus are usually not subject to the Special Defence Contribution (SDC) taxes, i.e. the tax imposed on the majority of the types of passive income. Nevertheless, they will continue to pay the remaining income taxes.
The due dates of the taxes are likely to change annually. The original deadline to file tax returns for the 2023 tax year in Cyprus is the 31st of July. But the government of Cyprus has postponed the deadline by 3 months up to the 31st of October.
Paying taxes is usually done most easily by depositing with the official online site Cyprus Tax Department, TAXISnet. They also come in paper form, though this is only in Greek.
Calculating tax residency in Cyprus
A tax resident, in Cyprus, is any person who satisfies the rule of 183 days or the rule of 60 days. The 183-day rule is used, and it says that any person who spends over 183 days in the country in a particular tax year is a tax resident.
Alternatively, the 60-day rule is used to define the tax residents, whereby the residents of Cyprus who spend at least 60 days of the tax year in Cyprus. And fulfil all the following requirements, are regarded as tax residents:
- Not lived in a single nation longer than 183 days in a year.
- Not to be a tax resident of another country.
- Walking around with existing attachments to Cyprus (e.g. business, family, home).
Foreign Tax Credit (FTC)
On the one hand, you will state that the FTC entitles you to the US tax credit dollar-for-dollar for foreign income taxes paid. This tends to considerably lower, or even abate, your US tax. You will pay more taxes in other countries than in the US., You can pay your tax and save more credits than you could pay on your tax bills in the future (ten years).
Foreign taxes to be FTC eligible must meet the following criteria: They must be legal, income-based, charged specifically to you and be paid. FTC can be claimed through a Form 1116.
Foreign Earned Income Exclusion (FEIE)
The FEIE, however, allows the exclusion of a certain amount of the income earned abroad by Americans from US taxation.
You may exclude $120,000 in the year 2023 and $126,500 in 2024 (the amount will go up slightly every year to adjust to inflation). Note that the exemption is only applicable to earned income, such as salary and wages and not passive income such as distributions, interests, dividends, and even rental income.
You should qualify under the FEIE, but this can only happen after you have satisfied the Physical Presence Test and the Bona Fide Residence Test. In case you do so, you will, automatically, also be eligible to get the Foreign Housing Exclusion, which can assist you in offsetting the qualifying housing expenditures (e.g. rent, occupancy taxes, parking fees). Form 2555 has to be filled out to claim the FEIE.
Reporting obligations
Although expats receive two particular tax advantages, they might be required to complete additional forms concerning their foreign financial assets. This comprises the:
Foreign Bank Account Report (FBAR)
FBAR is filed by Americans who have an account in a foreign account worth more than 10,000 (FinCEN 114). It does not have to be in one account either. In case the total amount in your foreign bank and other financial accounts exceeds the maximum required amount of $10,000, you are required to furnish an FBAR.
Statement of Specified Foreign Assets (Form 8938)
Form 8938 has to be filed by Americans overseas whose assets abroad end up exceeding $200,000 on the last day of the tax year. Or exceeding $300,000 at any other time during the tax year.
Other Cyprus taxes
Property taxes: There are the following taxes that relate to property in Cyprus:
- Transfer of property: 3-8 percent depending on value.
- Not applicable to purchases of property liable to VAT; may be lower in certain circumstances.
- Registration charges on mortgages: 1 percent.
- Stamp duty: 0-0.2 percent based on value.
You can also view these posts:
Cyprus immigration quotas and caps – what you need to know
Things to know before immigrating to Cyprus
Cost of living in Cyprus
