(Tax) residency wanted. Down to the real problem of being a digital nomad

[CyprusLaw]

Each case must be considered separately. As a general point in⁠ case you are an EU citizen you need to satisfy any of the following:

a) you are employed, or b) you have acquired permanent residence status, or c) you are⁤ a member of the family of a beneficiary or d) you are insured in another⁣ EU Member State.

Please note that the meaning of permanent residence for an EU citizen⁢ is basically to have the yellow slip. If you don't satisfy any of the above︀ we would need to consider your case separately.

 

[complex]

AFAIK citizenship determines this, not where you're moving from. I'd also⁠ be relocating from Asia (EU citizen).

 

[backpacker]

Thank you for the reply.
Switzerland is a member of the Schengen agreement. However, it is neither an EU nor EEA︀ member state. Due to the Schengen agreement the yellow slip (MEU1) procedure is applicable. According︁ to this page -> EURES Cyprus - Before moving to Cyprus nationals of Switzerland are︂ treated equally to EU citizens. I may assume that for the purpose of GeSY/GHS the︃ same applies.

• a) I am not employed; I am retired (self-sufficient without business)
  
• b) I︄ can only inquire for permanent residency after having had temporary residency (yellow slip) for the︅ first 5 years. Temporary membership is form MEU1
  
• c) N/A
  
• d) I am neither insured︆ in any EU/EEA member state nor in Switzerland since I left the latter already in︇ the early 1990's
  

Your points show clearly the reasoning why -in the first 5 years-︈ GHS only covers employed or self-employed (ref. your post #73) . During the first 5︉ years a retiree stays in CY on the basis of the yellow slip (MEU1) which︊ is considered to be "temporary residency". Only after these 5 years the person is able︋ to gain permanent residency. Hence, without any form of employment he/she will have to contribute︌ to GHS without receiving any benefits.

I agree with @complex (post #75 of this thread)︍ that all this sounds weird and should not happen within the EU due to reciprocity.︎ However, it seems Bruxelles decided that it won't interfere, for some reason.

 

[backpacker]

@CyprusLaw and @complex

The following is a useful summary I found about a year ago:‌

All applicants must have either MEU1 or MEU3 Yellow Slip.
RIGHT OF RESIDENCE (AFTER 90‍ DAYS)
MEU1 + paying Social Insurance = YES (contributions paid via Social Insurance)
MEU1 +⁠ E121/ S1 Form = YES (no contributions payable)
MEU1 only = NOT ELIGIBLE
PERMANENT RESIDENCE⁤ (AFTER 5 YEARS)
MEU3 + paying Social Insurance = YES (contributions paid via Social Insurance)⁣
MEU3 + E121/ S1 Form = YES (no contributions payable)
MEU3 only = YES (contributions⁢ collected by Tax System or The Treasury - this to be confirmed)
If YES, then︀ Dependants/Beneficiaries are also eligible and they do not contribute.

Compare the above with this official︁ link Cyprus GHS . So, the combination of neither being employed nor self-employed and not︂ having permanent residency let people pay GeSY/GHS for the first 5 years without receiving benefits.︃

Another practical advise can be found below (not putting a link here for obvious reasons).︄ Please take note of the posts date - during that time the UK was still︅ an EU member state:

All in all a very complicated issue. To me it seems that CY wants︉ to exclude foreign retirees from national healthcare since they are -naturally- more expensive. That would︊ be fine if CY would not force the retiree to pay 2.65% annually for GeSY/GHS︋ without any possibility to benefit from this system.

Compare the above with this official link︌ Cyprus GHS - -it is all about the word "permanent".

 

[complex]

This looks absurd if true. Collecting insurance for a specific reason and then not offering‌ the same said service. How can this be legal? They could have increased GESY rates‍ for very old residents but I suppose they didn't proceed with this due to some⁠ discrimination lawsuit fears.

 

[backpacker]

Indeed, it is insane. When I first⁤ checked on Cyprus in May I could not believe it myself. Then checked several websites⁣ and they all came to the same conclusion: As long as you only have MEU1,⁢ are not employed or self-employed (i.e. you are self-sufficient without any business), you will have︀ to pay for GeSY without receiving any benefits. Only once you achieve MEU3 (after 5︁ years) you will be able fully benefit.
Now read the replies of @CyprusLaw regarding this︂ matter and you will have further confirmation (specifically his post #73).

In short: GeSY/GHS is︃ -in the first 5 years- just another tax.

This absurd procedure was the reason why︄ I did not consider Cyprus any further. How can one trust a government which comes︅ up with such a system?
Note: This is an EU member state, hence I am︆ sure this system has been fully sanctioned by Bruxelles.

 

[backpacker]

@complex
After all my research I came to the conclusion that the most straight forward‌ jurisdictions in the EU are Bulgaria and Romania: Simple tax structure, you will get what‍ you pay for, specifically Bulgaria ideal if you do not like obscure business structures.
Of course, think twice before moving: You get yourself in the arms of the ever more⁠ autocratic European Union.

 

[khinkali]

This is also my big concern.‍ Cyprus appeals on a number of levels but if Berlin, Paris and Washington all decide⁠ to align on what kind of hegemony they want to impose, nowhere in the EU⁤ will be safe from potentially retroactive changes.

Suddenly, one could regret not picking Carribbean, Gibraltar,⁣ UAE, Channel Islands or SG and it could be too late to do anything about⁢ it.

 

[backpacker]

Yes, indeed.

For an EU citizen like @complex I see the following problem: Currently he lives outside the⁣ EU. The longer he lives outside the more he distances himself from his motherland. After⁢ a while -usually 10 years- he becomes an estranged citizen and in certain counties will︀ even loose his voting rights. So, even if the EU or the country where he︁ was born imposes citizenship based taxation it will be largely impossible to impose it on︂ people who are outside of the Union for more than a certain period of time︃ (perhaps >10 years). Too much retro-action is legally impossible.
However, if he would take residency︄ in an EU member state such a move could -in the future- easily be classified︅ as returning home: One Union - One System = EU Calls on Bulgaria & Germany︆ to Start Using New Format for Residence Permits for Non-EU Nationals - SchengenVisaInfo.com
Do take︇ note of the card's name: European Citizen Card , not that far away from a︈ European Tax Card

This might not happen tomorrow but things develop faster than anybody would︉ have thought just a few years ago.
There are certainly many positive aspects of a︊ life in the European Union. One has to weight carefully the Pros' and Cons' against︋ each other to find a good individual balance.
A Pro would definitely be good medical︌ healthcare and that's why I am so disappointed by Cyprus. From an EU member state︍ I expect better than an obscure regulation which intentionally excludes most paying foreigners from national︎ healthcare.

 

[complex]

Have you⁠ considered buying private insurance? I know it's an unfair system but it's manageable.

I've also⁤ written to CY authorities with this question, I'm not expecting a reply anytime soon. It⁣ would be interesting to ask about this on the EU level. Social Insurance system in⁢ CY seems to apply to benefits such as retirement, unemployment and disability. All which I︀ voluntarily won't participate in. Yet, the Cypriot system asks to pay for SI to get︁ GESY, there is not even a direct connection between the two.

 

[complex]

There's some silent⁣ protest from the newer member states (including mine), they don't go with everything that the⁢ German-Franco-Italian bureaucrats dictate as before. That's a tiny spec of hope, otherwise we'd looking at︀ being taxed at 90% and all becoming little working ants for the monster bureaucracy machine.︁

 

[khinkali]

< shudder >

I agree‌ about the Cyprus example but there are others too. UK has quite different rules for‍ NHS access and tax residence. You can have either, without the other. As far as⁠ I can tell there is very little enforcement and plenty of fraudulent access though.

 

[backpacker]

The problem with private insurance: It's great when you are young, it︀ is manageable when you are middle-aged, it is hell when you get old. Look at︁ BUPA premiums + their Terms & Conditions and you will understand.
I am fortunate to︂ have a different private health insurance with much more civilized premiums - still it is︃ not the ideal situation.

Nevertheless, CY does not work the way I wanted it to︄ work and this https://www.offshorecorptalk.com/threads/short-tax-residency-options.33230/page-6#post-189165 also let me think twice.
Funny: As clear cut as tax︅ laws are in CY, as shaky are social security laws. Usually it is the other︆ way around.

 

[backpacker]

It's all just history repeating itself ...

 

[complex]

When it comes to SI, I still figure @Cyprustr posts have︁ been correct and capital gains don't fall under the self-employed category. I don't see anywhere︂ in Cyprus law a difference between short-term gains and long-term gains like in US. Investments︃ are investments and not employment. The moment you start investing money for others, it would︄ become a business though.
But I will consult with someone in CY before pulling the︅ trigger and likely get the confirmation letter just like @Cyprustr.

 

[complex]

Since I was‌ born in the Soviet Union, some people said in 2004 during the EU expansion with‍ a smirk "from one union to another". That held negative connotation.

 

[backpacker]

The remark of⁢ @CyprusLaw was the first skeptical post I found to this regard. It was always clear︀ to me that only GeSY/GHS will have to be paid (2.65%) but SI is not︁ due. However, he claims that it has been confirmed that both are due https://www.offshorecorptalk.com/threads/short-tax-residency-options.33230/page-6#post-189165 .
Considering obscure Cyprus regulation of foreigners being obliged to pay GeSY/GHS without receiving any benefits︂ I would not be surprised if he is correct in that SI is due if︃ capital-gains get classified as self-employed income. Ironically, once your capital-gains get classified as self-employed income︄ you will be able to benefit from GeSY/GHS.
Frankly, such unclear regulation I can easily︅ accept in a 3rd-World-Nation but from an EU-member state I expect guidance and properly formulated︆ laws.

Bulgaria offers a clear path with a low cost of living and is a︇ great alternative to CY: 8% on bank interest, 5% on dividends, 10% upper ceiling for︈ private individuals and last but not least 0% (zero!) for capital gains of securities which︉ are traded/listed on a stock exchange of an EU/EEA member state. You have to pay︊ for government health insurance but you will also receive benefits. All very simple and straight︋ forward, if one really wants to settle in the European Union.

 

[complex]

So the official response from Cyprus Civil Registry and Migration Department came in:

"If you‌ are in possession of an MEU1 and you make social insurance contributions, you can register‍ with GESY. If you do not make social insurance contributions you can register with GESY⁠ only if you have an MEU3, which requires 5 years of continuous residence in Cyprus⁤ to be issued. Taxation is not a relevant factor for the registration at GESY."

Does not make sense entirely but it is what it is. Paying SI does not make⁣ sense either as I won't be eligible for unemployment benefits anyway and as a non-dom⁢ I won't be staying until I receive a pension. At least after 5 years you︀ could forego private insurance.

 

[backpacker]

Better look for another place to︂ live. There are much easier options out there, even within the EU.

 

[Piano]

What are typical private health insurance rates ?