Permanent Establishments (PE) and Tax Residency

Cyprus: Permanent Establishments (PE) and tax residency in times of COVID-19

Introduction:

All governments worldwide, have implemented strict measures for tackling the Covid-19 pandemic, including amongst others the home self-isolation, working from home arrangements, suspension of contracts of employment etc. These measures place restrictions on the physical presence of individuals in the workplace and consequently raise concerns related to the possible impact on the tax residence status of natural and legal persons / entities, but also on the permanent establishment of companies.

In light of the above, the Organization for Economic Co-operation and Development (OECD) has recently issued general guidelines for the interpretation of any tax issues caused by the COVID-19. Taking that into consideration on 27th  October 2020, the Cyprus Tax Department issued an Implementing Guideline No. 04/2020 to clarify the application of Article 2 of the Income Tax Legislation relating to tax residency and permanent establishment (PE).

The Implementing Guideline 04/2020 clarifies the following:

1.      The period from 21st  March 2020 to 9th  June 2020 is determined as the time period were restrictions on travelling in/out of Cyprus applied and as such this period will not be taken into account on application of the relevant articles of the law. In case of a taxpayer had travel restrictions before or after those dates, then the necessary evidence should be provided for supporting the case.

Permanent Establishment:

1.      The activities exercised in Cyprus by individuals who are physically present in Cyprus merely due to COVID-19 restrictions, (whereas under normal circumstances they should have been abroad), will not lead to the creation of a permanent establishment in Cyprus.

2.      The temporary period during which individuals remained abroad due to COVID-19 restrictions, (whereas under normal circumstances they should have been in Cyprus), should not be considered when determining the creation of a permanent establishment in Cyprus.

Tax Residency Issues for companies:

1.      A company that is a non-tax resident in the Republic will not be considered as a tax resident in the Republic due to its stay in the Republic of its personnel, directors, agents or employees when the reasons for their stay in the Republic are exclusively related to COVID-19.

2.      The tax residency of a Cyprus company will not be affected by the inability of a director to travel to the Republic to attend a meeting of the Board of Directors, when the reasons for not being able to travel to the Republic are exclusively related to COVID-19.

Tax residency issues for individuals (both under 183 days and 60 days rules):

  • An individual staying in Cyprus exclusively due to COVID-19, then the period from 21st March 2020 to 9th June 2020 will not be taken into account for the purpose of determining his tax residency.
  • An individual staying abroad due to the COVID-19 (whereas under normal circumstances he should have been in Cyprus), then that person for the purposes of determining his tax residency he will be considered ,according to the legislation, that he was in the Republic for that period (21st March 2020 to 9th June 2020).

Taxation of income (individuals):

  • Individuals will be eligible for the 50% exemption if the employment income falls below €100.000 exclusively due to  COVID-19 (i.e. due to salary reduction), providing the necessary evidence.
  • Individuals travelling abroad for the performance of their duties, as per their employment contract, but due to COVID-19 they were unable to do so, the way of estimation of their taxable income will not be affected for the purpose of applying the article 36(5) of the law (90 days rule).


Extended deadline for the submission of income tax returns for 2019 – New Deadline is 15 December 2020

ENGLISH

  1. Electronic submission of the personal income tax return by employees, pensioners (Form T.D.1) whose gross income exceeds €19.500 and for the payment of the final tax due. 

  1. Electronic submission of the self-employed persons (Form T.D.1 self-employed) with turnover not exceeding the € 70,000 and who do not have the obligations to prepared audited financial statements and for the payment of the relevant tax due. 

Русский 

Продление сроков подачи налоговой декларации за 2019 год 

20 октября 2020 года налоговый департамент объявил, что сроки подачи налоговой деклации продлены до 30 ноября 2020 года: 

а. Электронная подача декларации о подоходном налоге с населения, работниками, пенсионерами (форма T.D.1), чей валовой доход превышает €19. 500 евро, и для уплаты окончательной суммы налога. 

б. Электронная подача самозанятых лиц (форма T.D.1 самозанятые) с оборотом, не превышающим €70.000 евро, которые не имеют обязательств по подготовлению аудированной финансовой отчетности и по уплате соответствующих налогов. 

Ελληνικά  

Παράταση της προθεσμίας για την υποβολή των δηλώσεων φόρου εισοδήματος για το  2019 και για την πληρωμή του φόρου. 

Σύμφωνα με διάταγμα που εκδόθηκε στις 20 Οκτωβρίου 2020, οι ακόλουθες προθεσμίες παρατείνονται έως τις 30 Νοεμβρίου 2020: 

  1. Η προθεσμία υποβολής ηλεκτρονικής δήλωσης εισοδήματος για το 2019 από μισθωτούς και συνταξιούχους (Έντυπο Τ.Φ.1 μισθωτού), των οποίων το μεικτό εισόδημα υπερβαίνει τις €19.500, καθώς και η πληρωμή του τελικού φόρου που οφείλεται σύμφωνα με την εν λόγω δήλωση (αυτοφορολογία) για το 2019. 

  1. Η προθεσμία υποβολής της ηλεκτρονικής δήλωσης εισοδήματος για το 2019 αυτοεργοδοτούμενου του οποίου ο κύκλος εργασιών δεν υπερβαίνει το ποσό των €70.000 και που δεν έχει υποχρέωση να ετοιμάζει εξελεγμένους λογαριασμούς (Έντυπο Τ.Φ.1 αυτοεργοδοτούμενου), καθώς και η πληρωμή του φόρου που οφείλεται σύμφωνα με την εν λόγω δήλωση (αυτοφορολογία), για το έτος 2019. 

Extended deadline for the submission of income tax returns for 2019

ENGLISH

  1. Electronic submission of the personal income tax return by employees, pensioners (Form T.D.1) whose gross income exceeds €19.500 and for the payment of the final tax due. 

  1. Electronic submission of the self-employed persons (Form T.D.1 self-employed) with turnover not exceeding the € 70,000 and who do not have the obligations to prepared audited financial statements and for the payment of the relevant tax due. 

Русский 

Продление сроков подачи налоговой декларации за 2019 год 

20 октября 2020 года налоговый департамент объявил, что сроки подачи налоговой деклации продлены до 30 ноября 2020 года: 

а. Электронная подача декларации о подоходном налоге с населения, работниками, пенсионерами (форма T.D.1), чей валовой доход превышает €19. 500 евро, и для уплаты окончательной суммы налога. 

б. Электронная подача самозанятых лиц (форма T.D.1 самозанятые) с оборотом, не превышающим €70.000 евро, которые не имеют обязательств по подготовлению аудированной финансовой отчетности и по уплате соответствующих налогов. 

Ελληνικά  

Παράταση της προθεσμίας για την υποβολή των δηλώσεων φόρου εισοδήματος για το  2019 και για την πληρωμή του φόρου. 

Σύμφωνα με διάταγμα που εκδόθηκε στις 20 Οκτωβρίου 2020, οι ακόλουθες προθεσμίες παρατείνονται έως τις 30 Νοεμβρίου 2020: 

  1. Η προθεσμία υποβολής ηλεκτρονικής δήλωσης εισοδήματος για το 2019 από μισθωτούς και συνταξιούχους (Έντυπο Τ.Φ.1 μισθωτού), των οποίων το μεικτό εισόδημα υπερβαίνει τις €19.500, καθώς και η πληρωμή του τελικού φόρου που οφείλεται σύμφωνα με την εν λόγω δήλωση (αυτοφορολογία) για το 2019. 

  1. Η προθεσμία υποβολής της ηλεκτρονικής δήλωσης εισοδήματος για το 2019 αυτοεργοδοτούμενου του οποίου ο κύκλος εργασιών δεν υπερβαίνει το ποσό των €70.000 και που δεν έχει υποχρέωση να ετοιμάζει εξελεγμένους λογαριασμούς (Έντυπο Τ.Φ.1 αυτοεργοδοτούμενου), καθώς και η πληρωμή του φόρου που οφείλεται σύμφωνα με την εν λόγω δήλωση (αυτοφορολογία), για το έτος 2019. 

SUBMISSION OF INCOME TAX RETURNS FOR THE YEAR OF 2019

English

On 25th August 2020, the Tax Department by an announcement informed the taxpayers that due to technical issues, the Income Tax Returns for the year of 2019 for: 

Employees, pensioners (Form T.D.1) and self-employed persons (Form T.D.1 self-employed) with turnover not exceeding the € 70,000, are not yet available for submission through TAXISnet. 

Due to the delay observed, the Tax Officer, intends to extend the submission of the above Income Tax Returns after the 30th October 2020, if necessary, to give the necessary time to all taxpayers  to submit their Income Tax Return in a timely and correct manner. 

The Tax Department apologizes for any inconvenience that may have been caused by the prolonged delay and informs that there is no cause for concern.  

The Taxis net users will receive a notification in their email (TAXISnet email address) when the Income Tax Returns for the year of 2019 will be ready for submission. 

Ελληνικα

ΥΠΟΒΟΛΗ ΔΗΛΩΣΗΣ ΕΙΣΟΔΗΜΑΤΟΣ 2019 (ΤΦ1_ατόμου και ΤΦ1_αυτοεργοδοτούμενου) Το Τμήμα Φορολογίας ενημερώνει ότι, λόγω τεχνικών ζητημάτων, οι Δηλώσεις Εισοδήματος 2019 για:

(α) μισθωτούς και συνταξιούχους (ΤΦ1_ατόμου) και

(β) αυτοεργοδοτούμενους των οποίων ο κύκλος εργασιών δεν υπερβαίνει τις €70,000 (ΤΦ1_αυτοεργοδοτούμενου), δεν είναι ακόμη διαθέσιμες για υποβολή μέσω TAXISnet .

Λόγω της καθυστέρησης που παρατηρήθηκε, ο Έφορος Φορολογίας, προτίθεται να παρατείνει την υποβολή των πιο πάνω Δηλώσεων και μετά την 30η Οκτωβρίου 2020, εφόσον χρειαστεί, ώστε να δοθεί ο απαραίτητος χρόνος σε όλους τους φορολογούμενους να υποβάλουν έγκαιρα και ορθά τη Φορολογική τους Δήλωση.

Το Τμήμα Φορολογίας απολογείται για την οποιαδήποτε ταλαιπωρία μπορεί να προκλήθηκε από την παρατεταμένη καθυστέρηση και ενημερώνει ότι δεν υπάρχει λόγος ανησυχίας. Οι χρήστες TAXISnet θα λάβουν σχετική ειδοποίηση στο ηλεκτρονικό τους ταχυδρομείο (TAXISnet email address), όταν η Δήλωση Εισοδήματος 2019 θα είναι έτοιμη για υποβολή.

Cyprus Tax Residence Certificate

PREFACE

Set out below is a summary of the main requirements and conditions that must be met for an individual to obtain a Cyprus tax residence certificate from the Cyprus Tax Department. Such certificate is usually needed by foreign tax authorities in order to apply the provisions of a double tax treaty with Cyprus (e.g. apply lower or eliminated withholding taxes on payments to Cyprus residents) and/or confirm that an individual is indeed tax resident in Cyprus. It is noted that the issuance of a tax residency certificate attracts a stamp duty of €80.

Read More

Individuals Relocating To Cyprus (Non-Dom)

Preface

Cypriot tax legislation includes several tax incentives for individuals who seek to relocate and become Cyprus tax residents.
The non-domiciled provisions, exempt high net worth individuals and entrepreneurs from Cyprus taxes on any dividends and passive interest earned from any source. At the same time, the absence of capital gains tax on the disposal of shares and the absence of wealth and inheritance tax make Cyprus a very promising alternative for people looking for a tax friendly home.

Moreover, in order for companies to enhance their corporate presence in Cyprus, the law includes several provisions facilitating the relocation of employees, a notable example the exemption of 50% of the income for any executive earning more than €100.000 per annum.

WHY CYPRUS

Cyprus’ offers a wonderful living experience combining a stress-free and relaxed way of life in a safe environment with a contemporary character, ideal for people who seek balance between work and pleasure.


HIGHLIGHTS 

  • The safest country in the World for countries with less than 5 million population (ValuePenguin.com, 2015)
  • Multicultural environment, over 20% of the population in Cyprus are non-Cypriots (Population Census, 2011) 
  • Clean waters with the highest number of Blue Flag beaches per capita in the world (EU Blue Flag ranking, 2015) 
  • The 5th best relocation destination worldwide (Knight Frank Global Lifestyle Review, 2013) ▪
  • Limassol, the second biggest city has been ranked 4th best retirement destination globally (Knight Frank Global Lifestyle Review, 2016)