Relocating to Cyprus - OECD’s Principal Purpose Test

[Johnwills]

I am thinking of relocating to Cyprus and getting a personal dividend from my home country instead of using corporate structures.

If i live there for 183 days do i need to prove anything else or come up with some reason I am there personally?

I am aware there is the 60 day thing but to avoid being penalised I am happy to stay 183 days, to make it super tight.

Do i need to create any more ties to Cyrus other than the days test? like run a company or anything else?

My tax treaty requires a principle purpose test. Is the "Principle Purpose Test" only for companies or applies to personal dividends also? Can it be argued that this is "Treaty Shopping"

In the tax treaty in Feb 2022 it was amended to the following

Entitlement to benefits​

Article 27 “Application of the Agreement in Special Cases” has been amended so that a benefit under this Treaty shall not be granted, in respect of an item of income, if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes (Principal Purpose Test) of the arrangement or transaction that resulted directly or indirectly in that benefit.

 

[CyprusLawyer101]

Once you have established your residency here and you do not anticipate any tax claims from your current jurisdiction of residency you should be fine.
What you should ensure to have in check is your current status in your current country of residency as they might still maintain taxing rights even after you have completed 183 days in Cyprus.
The level of presence you need to establish in Cyprus depends on your current residency country and should also be examined in conjunction with your current affairs in your country of residence.

Yes, the principle purpose test in double tax treaties applies to both individuals and companies. The principle purpose test is a provision in double tax treaties that is used to determine whether a transaction or arrangement between two or more parties is being carried out for the primary purpose of obtaining a tax benefit. This test is often used to determine whether a person or company is entitled to the benefits of a double tax treaty, such as a reduced rate of tax on certain types of income or gains. The principle purpose test is intended to prevent abuse of double tax treaties by ensuring that the benefits of the treaty are only available to those who are engaging in bona fide transactions or arrangements that are not primarily motivated by tax considerations.

 

[Johnwills]

I have been out of my home country for more than 4 years living in Qatar, but my home country is a very agressive country in terms of chasing tax. All my money would come from that home country. I own a company there and at the moment I am receiving a corporate dividend to my company in Qatar and then paying it out via salary. Qatar obviously wont chase anything but I am just wondering if I liquidate my Qatar company so the shares of my home country company automatically fall back into my name and I receive a personal dividend to Cyprus, how agressive my home country will be.

If I move to Cyprus for 183 days and get a personal dividend but have not job there or business really, can the principle purpose test come into play as I have no real reason to be there aside from tax. I can buy a house there etc and stay there for the required days but can they drill through this and disqualify me from the tax benefits of the treaty?


From reading the principle purpose test, it seems the reason to move there cant be tax....

 

[CyprusLawyer101]

I have been out of my home country for more than 4 years living in Qatar, but my home country is a very agressive country in terms of chasing tax. All my money would come from that home country. I own a company there and at the moment I am receiving a corporate dividend to my company in Qatar and then paying it out via salary. Qatar obviously wont chase anything but I am just wondering if I liquidate my Qatar company so the shares of my home country company automatically fall back into my name and I receive a personal dividend to Cyprus, how agressive my home country will be.

If I move to Cyprus for 183 days and get a personal dividend but have not job there or business really, can the principle purpose test come into play as I have no real reason to be there aside from tax. I can buy a house there etc and stay there for the required days but can they drill through this and disqualify me from the tax benefits of the treaty?


From reading the principle purpose test, it seems the reason to move there cant be tax....

The principla purpose test applies to the treaties. Tax residency determination and taxing rights by each jurisdiction goes under a different approach.
If you wish to discuss this and the options available I would be happy to PM you.

 

[Businessguy32]

Hi if i go to live in Cyprus next year and my only income is dividend income from a european country. I will not have a job in Cyprus. If i stay there for 183 days is there a risk that i will fail the principle purpose test

 

[CyprusLawyer101]

Failing the purpose test for what benefit?

 

[Businessguy32]

i will receive a dividend from my home country with zero witholding tax in my home country, as per the tax treaty with Cyprus

 

[CyprusLawyer101]

Is your primary purpose form mocing to Cyprus to claim the benefits of the treaty? How long do you intend to stay in Cyprus?
Which jurisdiction is your company located? Is is also your country od previous residence?

 

[Businessguy32]

Is your primary purpose for moving to Cyprus to claim the benefits of the Treaty?

Yes that is the only purpose to relocate to Cyprus. I dont need a company and all that substance and nonsense. i can just get a personal dividend and relax. After living abroad for years, everywhere is basically the same. All you need is a good woman, good wifi, nice modern apartment, some nice restaurants and bars in the area and thats it.





How long do you intend to stay in Cyprus?

As long as my company makes money in my home country. At least 10 years and probably for the rest of my life life



Which jurisdiction is your company located.



My company is located Europe. I left Europe 8 years ago and have been tax resident in Qatar since then. I have tax resident certificates for all past years in Qatar.

 

[CyprusLawyer101]

Is your primary purpose for moving to Cyprus to claim the benefits of the Treaty?

Yes that is the only purpose to relocate to Cyprus. I dont need a company and all that substance and nonsense. i can just get a personal dividend and relax. After living abroad for years, everywhere is basically the same. All you need is a good woman, good wifi, nice modern apartment, some nice restaurants and bars in the area and thats it.





How long do you intend to stay in Cyprus?

As long as my company makes money in my home country. At least 10 years and probably for the rest of my life life



Which jurisdiction is your company located.



My company is located Europe. I left Europe 8 years ago and have been tax resident in Qatar since then. I have tax resident certificates for all past years in Qatar.

if you want to disclose your country for a more precise risk approach feel free to pm me, but in general you should be fine .