What is the Cyprus Non-Domiciled Taxation?

Great news for non domiciled Cyprus residents! The country has introduced tax rules for individuals who are considered ‘non-domiciled’ or ‘non-dom.’ Investors who are not domiciled in Cyprus avoid the imposition of Special Defence Contribution (SDC) tax rates on income received from rents, dividends or interest, even if the income is then deposited into a Cyprus bank or subsequently used in Cyprus.

Two simple examples of SDC rates include:

• Paying a 17% tax on dividends which have not been distributed after four years
• Paying a 30% rate on interest income received, whether the income originated in Cyprus or abroad

Non domiciled Cyprus Residents Tax Implications 

Neither of these applies to those who are — or who become — 'non-doms.' Additional tax benefits available in Cyprus to high net worth non-dom tax residents include:

1. Exemption from capital gains tax
2. Additional exemption from capital gains tax.
3. Exemption from wealth, gift or inheritance taxes
4. No income tax on the first €19,500 earned and low progressive rates on additional income

There are two other exceptional benefits available for individuals who receive income from Cyprus-based employment, but who were not residents on the island before taking up the position. Those benefits are:

• For the first three years of employment, the tax on income will be either €8,550 or calculated at 20% (whichever is lower).
• For the first five years of employment, there will be a 50% tax exemption on income exceeding €100,000.

Who May Qualify as a Non-dom?

The Wills and Succession Law defines the status in detail, and individuals should seek appropriate legal advice when considering this option. Briefly, the following applies:

• A tax resident is someone who is physically present in Cyprus for a total of 183 days during a calendar year.
• A person is considered 'domiciled in Cyprus' if they have a 'Cypriot domicile of origin' (they were born to a Cypriot father), BUT it does not include anyone who has permanently established a domicile outside of Cyprus and maintained it for seventeen of the previous twenty years.

Establishing non-dom Status

The procedure to establish non-dom status and to benefit from the tax advantages is straightforward. The applicant should:

• Complete the appropriate new taxpayer documents and submit them to the Cyprus Inland Revenue Department (IRD)
• Include a certificate from the current domicile confirming the seventeen-year tax residency

When those documents are correctly completed and submitted, the applicant should receive the non-dom tax resident certification from the IRD. An opportunity as advantageous as this should be given careful consideration, and all documents should be carefully completed. To be sure you make the right decisions, as defined by the Wills and Succession Law, complete all the appropriate documents, and submit them as required, please contact us so we can work with you to bring the process to a successful conclusion.