# Tax Questions



## Putrijaya (May 25, 2016)

Hi everyone!

I am an American, my wife is Chinese with a US Permanent resident card. We are in the USA now but want to move somewhere with nicer climate and due to high level of income we pay ALOT of taxes in the US. If we leave the US we can avoid paying state income tax (10%) and we would also get the Foreign Earned Income credit if we were outside of the US for 330 days a year. All in all this would save us $70,000 every year and possibly more as our income could increase. We run an online company and work remotely.

If we invested 300,000 EUR in property and gained residence status would we have to then pay taxes on our income earned outside of Cyprus? We would of course be paying US taxes, but I am wondering specifically if Cyprus will ask us to file tax returns to determine how much they would tax our income earned outside Cyprus.

Thank you in advance!


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## Veronica (Apr 5, 2008)

These are the requirements for permanent residency of non EU members

PERMANENT RESIDENCE PERMIT CATEGORY F


REGULATION 5(F) OF THE ALIENS AND IMMIGRATION REGULATIONS 



Upon the decision of the Minister of Interior of the Republic of Cyprus, dated on 7/05/2009, when a non EU Member buys a PROPERTY - RESIDENCE for himself and his family of €300.000 and more, his application for Permanent Residence, Category F will be examined favourably.



This type of permit is granted to those NON EU nationals, who possess and have fully and freely at their disposal a SECURED ANNUAL INCOME, high enough to give them a decent living in Cyprus, WITHOUT HAVING TO ENGAGE IN ANY BUSINESS, TRADE OR PROFESSION. This income must come from legal sources from abroad. For example, it might come from pensions, permanent deposits, business activities, ownership of companies, shares etc.



According the provisions of the Law the MINIMUM annual income required is €9,568.17 for a single applicant and €4,613.22 for every dependent person, but the Civil Registry and Migration Department may demand ADDITIONAL AMOUNTS as necessary. These additional amounts might come from annual maintenance expenses of the property, educational, medical and other needs of the family in each particular case. It is always necessary to take in consideration ALL NEEDS OF THE FAMILY of the applicant and to offer solid evidence that the applicant is able to cover all those needs on the long run. He has to prove that the money he is getting from abroad will be enough to cover ALL EXPENSES of the family.


As the Category F is the permit, granted once but for the permanent stay in Cyprus, the Immigration Authorities will examine the STABILITY and RELIABILITY of annual income during a long period of time. The possession of a solid amount of money, deposited in one of the banks of Cyprus might facilitate the application.


Basically, the most important requirements are:

1.The applicant has enough money to cover all expenses of all members of his family

2.This money comes from abroad

3.This money comes from legal sources

4.This income is secured, reliable and consistent on a long run and this income will be maintained in time


If there is a reasonable doubt that the applicant or any of his dependents might become an UNREASONABLE BURDEN ON THE SOCIAL ASSISTANCE of the Republic of Cyprus his application will be rejected.


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## Putrijaya (May 25, 2016)

Thanks Veronica, the requirements to get the residence are definitely possible for us. I am just wondering how Cyprus will tax my income earned abroad that has already been taxed by the USA.


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## panikos0 (Feb 7, 2015)

Google for "Cyprus Tax Facts 2016 - Deloitte". It will solve all your questions


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## Putrijaya (May 25, 2016)

panikos0 said:


> Google for "Cyprus Tax Facts 2016 - Deloitte". It will solve all your questions


Doing now...


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## Putrijaya (May 25, 2016)

This is good news! 95% of my income is from dividends!

The following are exempt from income tax:
• Dividend income (The whole amount)


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## Transcend (Dec 25, 2015)

Putrijaya said:


> This is good news! 95% of my income is from dividends!
> 
> The following are exempt from income tax:
> • Dividend income (The whole amount)


How is your online business structured? I presume it is a limited company, and therefore you will be subject to Cyprus corporate tax on your profits. You need to look at the corporate tax section of the "Cyprus Tax Facts 2016 - Deloitte" guide as well as the personal tax section.

You will still be paying a lot less tax than you would be in the USA.


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## Putrijaya (May 25, 2016)

Transcend said:


> How is your online business structured? I presume it is a limited company, and therefore you will be subject to Cyprus corporate tax on your profits. You need to look at the corporate tax section of the "Cyprus Tax Facts 2016 - Deloitte" guide as well as the personal tax section.
> 
> You will still be paying a lot less tax than you would be in the USA.


My company is a US S-Corporation. On my tax return the money from the business is referred to as "Ordinary Business Income". It's not quite the same as "Dividends" from a C Corp.

the problem is I still have to pay US income taxes, but I was hoping the savings from the Foreign Earned Income Exclusion would not be eaten up by taxes to Cyprus.

Thanks for the help. How are liking Penang? I have been there several times and love it. Food is amazing!


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## Transcend (Dec 25, 2015)

Putrijaya said:


> My company is a US S-Corporation. On my tax return the money from the business is referred to as "Ordinary Business Income". It's not quite the same as "Dividends" from a C Corp.


One issue you need to be aware of is that the Cyprus tax authorities will seek to tax your US company as if it were domiciled in Cyprus, deeming it to be "managed and controlled" from Cyprus.

If you were planning to move permanently to Cyprus, you may wish to explore the idea of setting-up a Cyprus company. The taxes levied on such companies is very low by European standards, and operating a Cyprus company from Cyprus may make your life simpler.



Putrijaya said:


> the problem is I still have to pay US income taxes, but I was hoping the savings from the Foreign Earned Income Exclusion would not be eaten up by taxes to Cyprus.


Yes, continuing to have to pay US tax is a major drawback. I have known people to relinquish their US citizenship because of their objection to this, but I think most USCs are understandably, reluctant to take this drastic step.

I think you will find taxes in Cyprus to be very low. From 2015, the Cyprus government introduced a "non-dom" status, which makes the tax situation even more attractive. For example, previously dividends were not subject to income tax, but were subject to a "Special Defence Contribution" of 17%. This SDC was a tax in all but name, and so effectively, dividends were taxed at 17%. The non-dom status means those not considered to be domiciled in Cyprus no longer have to pay the SDC. Therefore dividends are now entirely tax-free. You can read more about the non-dom changes at the following web page:

https://www.world.tax/articles/cypr...-the-place-hotter-q-a-on-how-to-get-there.php 



Putrijaya said:


> Thanks for the help. How are liking Penang? I have been there several times and love it. Food is amazing!


I am no longer in Penang (I must change my status on this site to avoid confusion). I stayed in Penang for two years, as a trial to see if I wanted to stay permanently. The food (and many other things) were very nice, but I am now in Cyprus to see if it is preferable. I have a shortlist of low-tax countries in Europe that I am making extended visits to before deciding which is best. I am trying to find a country that offers the best balance between low-tax and high lifestyle. It's not easy, but my search continues....


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## zach21uk (Jun 26, 2014)

My wife will certainly be happy to see more Americans coming to Cyprus!


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## Rema (Aug 12, 2012)

Veronica said:


> These are the requirements for permanent residency of non EU members
> 
> 
> Basically, the most important requirements are:
> ...



In addition to the above, if you are a Non EU citizen, you will also be required to take out private medical insurance.

Rema


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