Dear CYAUSE,

 

I am an EU national who works at sea. I am employed as crew aboard a privately owned yacht and my employer is a company incorporated outside the European Union, which is neither managed nor controlled from Cyprus. I am working away from land for well over 183 days in a normal year, and I am now looking at Cyprus as my base. My spouse would relocate with me.

 

My own reading of the Cyprus ninety-day exemption is set out below, and I would be grateful if you would tell me whether I have understood it correctly.

 

• I must be a Cyprus tax resident for the calendar year in question, either under the 183-day rule or under the sixty-day rule.
• I must exercise the employment outside Cyprus for more than ninety days in aggregate in that year, so at least ninety-one qualifying days, and the days need not be consecutive.
• What matters is where I physically perform my duties, not where my salary is paid or where the contract was signed.
• I must be a genuine employee under a real employment agreement. Income taken as a contractor or consultant, or through my own company, may not qualify.
• My employer must not be tax resident in Cyprus, or must be a permanent establishment outside Cyprus of a Cyprus employer.

 

I am also told that my yacht employment on its own probably does not satisfy the Cyprus economic-connection condition that the sixty-day route requires, and that I would need a separate Cyprus link such as employment by a Cyprus company, a business carried on in Cyprus, or an office held in a Cyprus company. That leads to my practical questions.

 

• Does a Cyprus company in which I hold a directorship genuinely satisfy that economic-connection condition, while my main employment remains with my foreign employer?
• Do all of my yacht duties count as employment physically exercised outside Cyprus, including travel days, leave and any days on which I work remotely from Cyprus? In particular, is the monthly salary I continue to receive during my time off in Cyprus outside the Cyprus tax net?
• Do Cyprus social insurance or General Healthcare System contributions apply to my foreign salary, or to dividends, rental income and my other worldwide income?
• Can the Cyprus company be no more than a small trading or investment vehicle with minimal income, or would I have to invent invoices for work that does not exist?
• What are the indicative costs of putting the residency and the company in place?

 

Kind regards,

 

---

 

Dear Client,

 

Your summary of the ninety-day exemption is accurate, and the warning you were given about the sixty-day route is the right one to take seriously. The answers below set out the reasoning in full, because in your case the tax outcome is decided less by the exemption itself than by two housekeeping conditions that are easy to lose.

 

1. How many days you spend in Cyprus decides which structure you need

 

Everything starts with your day count in Cyprus, not with the yacht. The exemption on your salary is tested the same way in each case; what changes is whether you need a Cyprus company at all in order to be treated as resident here.

 

Days physically in Cyprus	Cyprus tax resident?	Is a Cyprus company needed?	Your foreign salary
183 or more	Yes, under the 183-day rule	No. Residency does not depend on one	Fully exempt if the ninety-day test is met
60 to 182	Only under the sixty-day rule, and only if every one of its conditions is met	Yes, in practice. A Cyprus business, employment or office is one of the conditions	Fully exempt if the ninety-day test is met
Fewer than 60	No	Not applicable	Cyprus has no claim. Your other jurisdictions decide

 

You tell us you are abroad for more than 183 days a year, so you fall in the middle row and the company matters. Had you been spending more than half the year physically in Cyprus, you would simply be a Cyprus tax resident individual with exempt employment income, and the company would be optional rather than structural.

 

2. The sixty-day rule, in full, and the condition that most often fails

 

The sixty-day rule treats you as Cyprus tax resident for a year in which you do not stay in any other single country for more than 183 days in aggregate, provided that all of the following are met cumulatively:

 

• you stay in Cyprus for at least sixty days in the year;
• you carry on a business in Cyprus, and/or are employed in Cyprus, and/or hold an office with a Cyprus tax resident company at any time during the year; and
• you maintain a permanent home in Cyprus, which you either own or lease.

 

Day counting is mechanical. The day you leave Cyprus counts as a day outside Cyprus, the day you arrive counts as a day in Cyprus, and a day on which you arrive and leave counts as a day in Cyprus. For crew on rotation this usually works in your favour, but it is worth keeping boarding passes and crew agreements rather than relying on memory at the year end.

 

The trap is in the second condition. If the business, the Cyprus employment or the office you rely on is terminated at any point during the year, you are not treated as a Cyprus tax resident for that whole year, even though you met every condition until then. Striking off the company in October, or resigning the directorship when a structure is reorganised, can therefore undo the residency position retrospectively for the entire twelve months. The lease or ownership of the permanent home needs the same discipline.

 

3. Your directorship: yes, but it must be real and it must last the year

 

Holding an office with a Cyprus tax resident company is one of the three alternatives the rule expressly allows, so a directorship can satisfy the condition while your main employment remains with your foreign employer. There is no requirement that the Cyprus link be your principal occupation or your main source of income.

 

What it does have to be is genuine. The company should be Cyprus tax resident in substance as well as name, with its management and control exercised here, board decisions actually taken in Cyprus and minuted, and a registered office and statutory records that are properly maintained. A directorship in a company that exists only on paper, with no decisions ever taken, is the weakest version of this and the one most exposed if your position is examined.

 

4. The yacht salary and the ninety-day exemption

 

Cyprus grants a full exemption on remuneration for salaried services rendered outside Cyprus for a period exceeding ninety days in a tax year to an employer who is not tax resident in Cyprus. Your employer is incorporated and managed outside the European Union and is not Cyprus tax resident, so the employer condition is satisfied on the facts you describe, and ninety-one qualifying days is a low bar for a seagoing rotation.

 

Two qualifications matter more than the headline. First, the test is about days on which the employment is physically exercised outside Cyprus. Days you spend in Cyprus do not count towards the ninety-one, and remuneration properly attributable to duties you perform while physically in Cyprus, including work done remotely from here, does not sit comfortably inside the exemption. Second, your leave is a question of fact rather than a question of timing: pay that genuinely relates to a qualifying period of service performed outside Cyprus is treated differently from pay for a period in which you are working from Cyprus. We would not want you to proceed on the basis that any salary received while you happen to be in Cyprus is automatically outside the Cyprus tax net, and the apportionment should be reviewed against your actual rotation and contract before you file.

 

The yacht’s flag is not decisive. What decides the position is the legal identity and tax residence of your employer, where you physically perform your duties, the number of qualifying days outside Cyprus, and whether your remuneration is genuinely salary under an employment agreement rather than consultancy or company income.

 

5. Non-domiciled status: what it removes, and what it does not

 

Non-domiciled status is a separate matter from residency and from the ninety-day exemption. An individual who has not been a Cyprus tax resident for at least seventeen of the twenty years preceding the tax year is not deemed domiciled in Cyprus for Special Defence Contribution purposes, which is what makes the dividend route attractive. It is not, however, a blanket exemption from every Cyprus levy, and this is the point on which expectations are most often set too high.

 

Levy	Position for a non-domiciled Cyprus tax resident
Special Defence Contribution on dividends and interest	Not payable while you remain non-domiciled
Income tax on dividends	Dividends are outside personal income tax in Cyprus in any event
General Healthcare System contributions	Not removed by non-domiciled status. Income earners contribute at 2.65%, subject to the annual cap of €180,000 of relevant income
Income tax on your foreign salary	Governed by the ninety-day exemption, not by domicile
Rental income	Income tax continues to apply. Special Defence Contribution on rents was removed for everyone with effect from 1 January 2026

 

So the honest answer to your third question is that non-domiciled status deals with the Special Defence Contribution and not with the General Healthcare System. The contribution base and the interaction with the annual cap need to be worked through on your own figures, particularly where income arises outside Cyprus, and we would expect to do that as part of onboarding rather than give you a flat assurance now.

 

6. Cyprus social insurance on a non-EU employer’s payroll

 

Cyprus social insurance attaches to employment activities physically exercised in Cyprus. On the facts you describe, your duties are performed aboard a vessel outside Cyprus for an employer with no Cyprus presence, so Cyprus social insurance would not ordinarily be chargeable on that salary. Two cautions apply. The European coordination rules that allocate social security between member states, and the A1 certificate that evidences the outcome, do not reach an employer established outside the European Union, so there is no equivalent instrument to rely on here. And if your duties change so that part of the work is performed from Cyprus, or if you later take remuneration from the Cyprus company, the analysis changes for that element.

 

7. No, you do not need to invent invoices

 

This is the part of your enquiry we would most like to put beyond doubt. Nothing in the sixty-day rule requires the Cyprus company to be profitable, or to reach a turnover threshold, or to have employees. A small trading or investment activity with modest income can be sufficient for the purpose, and a holding or investment company that genuinely manages your own portfolio is a perfectly ordinary basis on which to hold an office.

 

Issuing invoices for services that were never provided would be the opposite of what we are trying to achieve. It creates false accounting records, it exposes you to a tax charge on income that does not exist, and it converts a defensible structure into one that collapses the first time anyone asks to see the underlying work. The company should be real and modest, not fictitious and busy.

 

What the company does need is the unglamorous part: a registered office, proper statutory records, annual accounts and an audit, a corporate tax return, and the annual levy and filings with the Registrar of Companies. Those obligations exist whether or not the company trades, and they are the real running cost of the residency position.

 

8. Indicative fees

 

Our consultation rate is €200 plus VAT for an hour, which is how we would normally scope a case like yours before any engagement. For the company itself, the annual accounting and audit cost follows the volume of activity rather than the structure, and on the profile you describe we would expect you to sit in the first or second band.

 

Company profile	Indicative annual accounting and audit fee, excluding VAT	Typical characteristics
Dormant	€450	No invoices, no employees
Small	Under €1,500	Up to 50 invoices, no employees
Small	Under €1,800	Up to 100 invoices, no employees
Normal	Under €3,000	Up to 300 invoices, fewer than three employees

 

These bands are indicative for the facts described and exclude company formation, the registered office and secretarial services, payroll if you later take a salary from the company, and the cost of putting the permanent home in place. Please note that a company you describe as dormant will not be treated as dormant for fee purposes if it has a bank account with regular movements, so the band should be confirmed once the activity is known.

 

9. Sequence and timing

 

Order matters, because the sixty-day rule is tested over a calendar year. In broad terms: incorporate the Cyprus company and appoint the board; put the permanent home in place by purchase or lease; establish your sixty days in Cyprus with evidence you can produce later; register with the Tax Department and apply for the non-domiciled status; and keep the company, the office and the home in place through to 31 December. Your spouse’s position is assessed in exactly the same way and on the same conditions, so if she is also to be resident under the sixty-day rule she needs her own economic connection here rather than relying on yours.

 

You can verify the statutory framework for yourself with the Cyprus Tax Department and the contribution rules with the Health Insurance Organisation.

 

This article is not investment, tax, legal or audit advice. It summarises correspondence with one client and the fees quoted are indicative for one set of facts, not an offer. The position of any individual depends on their own circumstances and on the law and practice in force at the time. For advice on your own position, please write to enquiries@cyprusaccountants.com.cy or call +357 22 336 309.

 

Kind regards,

 

---