Europe’s coordination of Social Security Coverage has enabled EU citizens to secure their rights and benefits in any EU Member State they choose to live, work or both. The EU rules on social security coordination apply in the EU, Iceland, Liechtenstein, Norway and Switzerland.
First thing you should know is that only one country is responsible for your social security coverage at a time. And it is usually the one you work. However, there are exceptions to this coordination rule:
- If your employer sent you to another country on a short assignment
- If you work simultaneously to two countries (Does not apply in your case)
For example, if you live in Cyprus and you are sent by your employer in another country eg. Greece for a short assignment not exceeding two years (24 months), your social security rights will be covered by Cyprus social security rules (it applies to taxation matters in the same way – analysed below), although you will be working in Greece. If you live in Cyprus and you are offered employment in Greece, your social security rights will be governed by Greece social security rules. This is to avoid continuous changes of legislation that govern and secure your rights since although coordination rules are regulations that apply directly in all EU countries, these rules do not replace national social security systems of each Member State with a single European one but rather coordinates them.
Provided that a substantial part of your activity (more than 25%) is effected in Greece, while you live in Cyprus, Greece will be responsible for your social security coverage and not Cyprus.
Cyprus upon its accession in the European Union on May 1st 2004 applied EU Regulations 1408/71 and 574/72, which they have been replaced on May 1st 2010 by the new Regulations 883/04,987/09 and 1231/10 and 465/2012. Find below:
- REGULATION (EU) No 465/2012 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22 May 2012 amending Regulation (EC) No 883/2004 on the coordination of social security systems and Regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004:
- REGULATION (EC) No 987/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems:
- For EC Reg.883/04 on the co-ordination of social security systems please check:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:166:0001:0123:en:PDF
Now, EU coordination does not apply to taxation. So, in which country you will be taxed? Greece or Cyprus?
There are no EU-wide rules that say how EU nationals who live, work or spend time outside their home countries are to be taxed on their income.
However, the country where you are resident for tax purposes can usually tax your total worldwide income, earned or unearned. This includes wages, pensions, benefits, income from property or from any other sources, or capital gains from sales of property, from all countries worldwide.
Each country has its own definition of tax residence, however:
- You will usually be considered tax-resident in the country where you spend more than 6 months a year (in this case you will be taxed in Greece) or,
- If you spend less than 6 monthsa year in another EU country (in your case Greece), you will normally remain tax-resident in your home country (Cyprus);
- Check tax rates, contact details of tax authorities, definitions of tax residence in Cyprus at the following link:
http://europa.eu/youreurope/citizens/work/taxes/income-taxes-abroad/cyprus/index_en.htm
In case you have been offered employment in Greece by your Cyprus employer for a limited time (maximum 2 years), you may be considered tax–resident, and therefore taxable, in your home country even if you keep your permanent home in your home country and your personal and economic ties with Cyprus are stronger. Contact the tax authorities of Cyprus to check which rules apply to your case.
Please note that your host country may also tax you or in case where you have been offered employment by a Greek local employer he may, for instance, deduct taxes from your salary at the time of payment.
In addition, whether or not you continue to be resident in your home country, Cyprus may tax income (for instance from property) arising there. In these cases, be aware that there are solutions to double taxation and make sure that your income is not taxed twice if it doesn’t need to be.
Under some double tax treaties , the country where you earn all or almost all of your income will treat you as tax-resident, even if you don’t live there. This status of fictitious tax-resident is granted by some countries to cross-border commuters.
Under EU rules, each country still has a certain latitude to decide what percentage of your income represents ‘almost all’. In any event, whether the country where you earn all or almost all of your income treats you as tax-resident or not, it will be obliged to give you the same allowances and tax reliefs that it gives to a resident.
In your case please check article 14 “Dependent Personal Services” of Cyprus – Greece Tax Treaty of 30/03/1968 to find out which Contracting State shall be eligible to tax your revenue from your employment income, according to your case specifics:
http://www.fbscyprus.com/assets/mainmenu/71/editor/CYPRUSGREECE.pdf
Of course if you receive all allowances available to residents in Greece, you should not expect to receive all allowances and reliefs available to residents in Cyprus. Be aware that tax authorities will communicate with each other to ensure that you don’t receive a double set of allowances and reliefs.
Under EU rules, no matter in which EU country you are considered a tax-resident, you should be taxed in the same way as nationals of that country under the same conditions. For example, in the country where you are tax-resident or where you earn all or most of your income, you should be entitled to:
- any available family allowances and tax deductions for childcare costs, even if the costs are incurred in another EU country
- any available tax deductions for interest on mortgages, even for a house you own in another EU country
- joint tax assessment with your spouse, if this is possible in that country
For further inquiries on this subject matter please contact the author of this article, Mr. Andreas Parparinos at [email protected].
