The Cyprus tax law does not define the terms "resident" or "ordinarily resident", but defines a "temporary resident" as a person who is in Cyprus for a temporary purpose only, not with any intent to establish his residence here and who does not reside here for an aggregate of more than six months during a tax year. A temporary resident is exempt from tax on income arising abroad but received in Cyprus.

A person is regarded as resident in Cyprus for a given year if he is physically present in the country for at least part of that year and he is not a temporary resident. He will always be resident if he is in Cyprus for more than six months in the year.

Ordinary residence is broadly equivalent to habitual residence. If a person is resident in Cyprus year after year, he is also ordinarily resident. It follows that a person may be resident but not ordinarily resident in Cyprus for a given year, if, for instance, he normally lives outside Cyprus but visits Cyprus in that year for more than six months. Or, he may be ordinarily resident but not resident for a given tax year, if, for instance, he usually lives in Cyprus but has gone abroad for a long period and does not visit Cyprus during the year.

A person is treated either as resident or non-resident for the whole year; he cannot be regarded as resident for part of the year and non-resident for the remainder. Thus a person who is ordinarily resident in Cyprus and who goes abroad for a period which does not include a complete year (e.g. if he was abroad for the period from July 1990 to March 1991) is regarded as remaining resident and ordinarily resident throughout.

The practical effect on a non-resident person's liability to tax is that he is not entitled to any personal allowances (except the earned income relief) and any payments to him in respect of income arising in Cyprus are subject to a withholding tax at the appropriate rates (see Chapter 4, section on "Double Taxation and Relief from Foreign Taxes").

This information was correct as of 24 December 1996.

The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be obtained before any action is taken.