Unlocking the Benefits of Cyprus's Non-Domiciled Tax Resident Status

Cyprus has emerged as a premier destination for individuals seeking favorable tax conditions, thanks to its Non-Domiciled (Non-Dom) Tax Resident program. This regime offers significant tax advantages, making it particularly appealing to expatriates, investors, and high-net-worth individuals.

Understanding Non-Domiciled Status in Cyprus

In Cyprus, an individual's tax obligations are influenced by their tax residency and domicile status:

Tax Residency: 

An individual is considered a tax resident if they spend more than 183 days in Cyprus within a tax year. Alternatively, under the "60-Day Rule," one can achieve tax residency by spending at least 60 days in Cyprus, provided they:

• Do not reside in any other country for more than 183 days in the same tax year.
• Are not tax residents in any other country.
• Maintain a permanent residence in Cyprus (owned or rented).
• Engage in business activities, employment, or hold an office in a company tax resident in Cyprus.

Domicile

Domicile refers to the country an individual considers their permanent home. In Cyprus, domicile is categorized as:

• Domicile of Origin: Typically acquired at birth, usually from the father.
• Domicile of Choice: Established by residing in a different country with the intention of making it a permanent home.

An individual with a domicile of origin in Cyprus is considered domiciled for tax purposes unless they have acquired a domicile of choice outside Cyprus and were not a tax resident in Cyprus for at least 20 consecutive years prior to the tax year in question.

Key Benefits of the Non-Dom Program

Individuals who qualify for the Non-Dom status in Cyprus can enjoy several tax benefits:

1. Exemption from Special Defence Contribution (SDC) Tax:

   • Dividends: Exempt from the 17% SDC tax on dividend income, regardless of the source.
   • Interest: Exempt from the 30% SDC tax on interest income.
   • Rental Income: Exempt from the 3% SDC tax on 75% of gross rental income.

2. No Capital Gains Tax: Gains from the disposal of securities, such as shares and bonds, are exempt from capital gains tax, provided the underlying assets do not include immovable property situated in Cyprus.

3. No Wealth or Inheritance Taxes: Cyprus does not impose wealth or inheritance taxes, making it attractive for high-net-worth individuals.

4. Personal Income Tax Exemptions:

• 50% Exemption: For individuals earning over €100,000 annually from employment in Cyprus, 50% of the income is exempt from taxation for a period of 10 years, provided they were not tax residents of Cyprus prior to the commencement of employment.
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• 20% Exemption: Alternatively, a 20% exemption (up to €8,550) is available for a period of five years for individuals earning less than €100,000, commencing from the year following the year of employment.

Eligibility Criteria

To qualify for the Non-Dom status, individuals must:

• Achieve Tax Residency: Fulfill either the 183-Day Rule or the 60-Day Rule as outlined above.

• Non-Domiciled Status: Ensure they do not have a domicile of origin in Cyprus, or if they do, they must have acquired a domicile of choice outside Cyprus and not have been a tax resident in Cyprus for at least 20 consecutive years prior to the tax year in question.

Why Choose Cyprus?

Beyond the tax incentives, Cyprus offers a strategic location at the crossroads of Europe, Asia, and Africa, a favorable Mediterranean climate, a high standard of living, and a robust legal and financial infrastructure. These factors, combined with the Non-Dom Tax Resident program, make Cyprus an attractive destination for individuals seeking both lifestyle and financial benefits.

For those considering relocation or investment opportunities, understanding the intricacies of Cyprus's tax system is crucial. Consulting with tax professionals and legal advisors can provide personalized guidance tailored to individual circumstances.

Note: Tax laws are subject to change. It is advisable to seek professional advice to ensure compliance and to take full advantage of available benefits.