On 27 October 2020, the Cyprus Tax Department (CTD) issued Implementing Directive No. 04/2020, which clarifies the application of the Cyprus Income Tax Law provisions (Article 2) related to tax residency and PE during the COVID-19 crisis.
The directive explains that the period from 21 March 2020 to 9 June 2020 with a potential extension is not taken into account when calculating tax residence and PE status. Employees working from home will not create PE and temporary absence or attendance due to pandemic-related restrictions will not affect Cyprus tax resident status.
The directive also clarified that a reduction in income due to the pandemic will not be considered in calculating threshold-based exemptions under Cypriot income tax laws.
