Change of tax residency: what documents will confirm that you are no longer a tax resident of another country?

Cyprus has become a popular jurisdiction for changing tax residency due to its attractive tax rates and tax regime.

According to the Cyprus Tax Code, an individual may be recognized as a tax resident of Cyprus based on two criteria:

1. Residing in the country for at least 183 days per year — this is the standard criterion for most countries.
2. The “60-Day Rule” — since 2017, Cyprus has introduced a flexible rule that allows individuals to become tax residents if they spend at least 60 days a year in the country, provided that they meet the following requirements:
   • The person is not a tax resident in another country.
   • The person conducts economic activity or has permanent residential property in Cyprus.
   • The person does not spend more than 183 days in any other country during the year.

Advantages of tax residency in Cyprus

Cyprus offers a number of advantages for individuals who become tax residents. First, it has a tax system based on low corporate tax rates and dividends.

The features of taxation in Cyprus are as follows:

Personal income tax: The income tax rate is 17%. However, tax residents of Cyprus can take advantage of tax breaks and exemptions on dividends, interest, and income from the sale of real estate.

• No inheritance tax: Cyprus does not levy inheritance tax, making it attractive to individuals who wish to pass on their assets to their heirs.
• Tax incentives for new residents: As part of a program to attract foreign investors, there are a number of tax incentives, including a reduced tax rate on income from dividends received from foreign companies.

Termination of tax residency in other countries

To change tax residency, it is necessary not only to meet the requirements of Cyprus, but also to provide documentary evidence of the termination of tax residency status in another country.

1. United Kingdom

In the United Kingdom, the tax residency system is regulated by the Income Tax Act. The United Kingdom uses several criteria to determine tax residency, including the number of days spent in the country, as well as more complex tests such as ties to home, family, and work obligations.

2. Germany

In Germany, tax residency is regulated by the German Tax Code (Abgabenordnung). In order to cease being a tax resident of Germany, it is necessary to provide evidence of departure from the country, including documents confirming that the person no longer has a permanent place of residence, as well as certificates confirming their absence from the country for a year.

Changing tax residency is a complex process that requires careful attention to compliance with the rules and requirements of the legislation in both the country where tax residency is terminated and the country where it is acquired.