CYPRUS VS. UNITED ARAB EMIRATES, WHERE TO MOVE? CHANGE OF TAX RESIDENCE
Which should you choose – Cyprus, Aphrodite’s Island, also known as the island of love, magnificent mountain areas, a multitude of ancient ruins, historic churches and hand-crafted jewellery, or the world’s tallest and largest structures, the exuberant creativity, innovation and luxury of Dubai, where one can feel the blast of winter air, go skiing or snowboarding, but also see penguins at the height of summer! Fresh or grilled halloumi or aromatic Manoushe, a Levantine pizza like flat bread, which has been made for centuries and tastes nothing like the Italian specialty. The sun shines all year round in both Cyprus and the United Arab Emirates (UAE), making one’s choice even more difficult. When considering changing tax residence it is worth comparing these two destinations by taking a closer look at the rational aspects on which one’s decision should be based on, such as the requirements and formalities associated with changing one’s tax residence and more importantly one’s life residence.
Should I move to CYPRUS?
In order to become a tax resident of Cyprus, all of the following conditions must be met:
- stay/live in Cyprus for a minimum of 60 days;
- not stay in another country for 183 days or more;
- at any time during the year in which the application for residence was made, carry out a business activity or be employed in Cyprus, or be part of the management structure of a Cypriot company;
- have a bank account in Cyprus;
- have a place of residence in Cyprus (owned or rented property);
- the centre of one’s vital interests must be in Cyprus.
Or should I move to the United Arab Emirates?
By contrast, all the following conditions must be met in order to obtain tax residence in UAE:
- obtain a UAE resident/employee visa;
- have a place to live in the UAE;
- have a bank account in the UAE;
- stay/live in the UAE for a minimum of 6 months in total during the year in which you apply for tax residence.
At first glance, it is clear that the main difference is the requirement in the period of time needed to be spent in the country of your choice. In any event, however, you must be employed by a company registered in their respective jurisdictions, alternatively you must be part of one of those companies’ governing bodies. In either case, it is also necessary to rent accommodation and have a bank account.
In terms of the required formalities and documents, the differences are not significant beyond the fundamental one of having to obtain a resident/employee visa for the UAE – this is not an easy condition to fulfil. Other documents required by the respective authorities are a passport, a tenancy agreement, a contract of employment and several other administrative documents. It is worth bearing in mind that documents that will help prove your presence, for the required amount of time, in the country of choice should be preserved. Those documents are among others: airline tickets, bills in the country of choice issued in your name, as well as contracts with wide-ranging service providers.
On the surface, the process of obtaining tax residency in Cyprus or the UAE does not seem particularly complicated. Nevertheless, as is usually the case in life, there can be complications. In order to spare yourself the stress of dealing with this process and to save yourself time, it is worthwhile using an experienced specialist who knows those procedures inside out, who is familiar with all the formal requirements (including all the catches), and most importantly one who is well acquainted with the nuances in the local officials’ approach, on whose kindness (as is also the case in Poland) the smooth handling of the matter largely depends. We recommend this read: Redomiciliation, or how to move a business to another country? Before we get to the point where we come face to face with the state official representative, there is a long list of logistical and organisational matters to be dealt with. Especially if we plan to move with our immediate family (spouse and children). The successful creation of a home environment in a new place largely depends on the right choice of property in which you decide to live. Whether it’s a cosy flat or a luxury apartment in the city centre, or maybe a cottage in the countryside, away from the hustle and bustle of the city and tourists, or a property with access to the sea, or a suburban detached house – we can assist you regardless of the choice you make with our experience, list of contacts and network of local estate agencies who will research the market for you, select properties as well as help you finalise the purchase or rental of your preferred the property.
Well then. Which country should you choose to live in and/or run your business from?
Given that the requirements and formalities are relatively similar, the economic development prospects, the investment opportunities, the cultural and social considerations and the tax system of the destination country will carry most weight. The distance between your destination and Poland may also be important. By moving your life interests to Cyprus, you remain in the EU, which can be relevant in the event of emergencies and other unexpected events that necessitate the return to your country of origin. Although the transport network to and from both countries in question is comparable, it will be much easier and faster to return to Poland from Cyprus.
Undoubtedly, one of the advantages of the UAE over Cyprus is the absence of corporation and income tax. The only tax levied is the standard 5% VAT, which mainly applies to goods or the provision of services in the UAE, i.e. when goods or services are sold to a local customer. Exports attracts a nil VAT rate.
Cyprus, on the other hand uses the non-dom system. This allows non-Cypriots to obtain special tax resident status giving them access to tax exemptions (e.g. from tax on dividends, interest, capital gains). These profits may be brought in to Cyprus or may remain in banks in other countries, but may still be shown on the annual tax return.
However, regardless of the tax offerings of both countries, neither life in Cyprus nor in the UAE is cheap. This is particularly true of the UAE.
On the other hand, we will find equally expensive locations in Europe, a good example is old and well-known Monaco. Costs are not the only factor that should be taken into consideration when deciding to change residence. Climate preferences are important to many customers, which is why the Mediterranean is very popular, Portugal and Italy especially. Sometime even the water temperature plays a part in a client’s choice and that disqualifies Portugal or the Isle of Man. Other important aspects are one’s occupation. For some people, working on a laptop by a pool is sufficient, other wish to be in London or Geneva, both of which have very friendly tax residence rules. Moreover, the logistical aspect should not be underestimated – this problem came to the fore during the Covid pandemic when flying out to any island proved very difficult.
Each location has its own character and without a doubt the very idea of change is quite attractive. That said, if you harbour doubts, no matter how small, we will be able to answer your many questions – we have after all moved to these markets on well over 100 occasions.
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