Tax Planning for Non-Domiciled Individuals in Cyprus: Maximizing Your Benefits

In July 2015, Cyprus adopted the idea of Non-Domiciled in Cyprus for tax reasons. This initiative seeks to position Cyprus as a top option for individuals (both EU and non-EU) considering shifting their personal tax residence to another country. Because it provides large package of tax benefits, the non-domicile concept is ideal for individuals with international income and firms in other countries. Those who have obtained a tax certificate from the Cyprus tax authorities will be regarded non-domiciled for a maximum duration of 17 years (after 17 years they will considered Domiciled tax residents in Cyprus and tax exemptions will not apply).

Cyprus is an attractive destination for foreign individuals looking to take advantage of its low-tax environment and with the addition of Non-Domiciled Rules, this country becomes the ultimate destination to relocate for you and your family. This article provides an overview of the non-domiciled rules in Cyprus and how they can benefit foreign individuals with tax benefits.

How to Obtain the status of Non-Domiciled in Cyprus

The non-domiciled rules in Cyprus are designed to provide tax benefits to foreign individuals who choose to become tax residents in the country. A person is considered non-domiciled in Cyprus if they can prove that their permanent home and center of their interests is not in Cyprus. Essentially, this means that a person who is non-domiciled in Cyprus is not subject to taxation on their worldwide income but only on income earned in Cyprus.

The exact explanation of the concept of non-domiciled may be found in the provisions of Cyprus Wills and Succession Law.

There are two types of domiciliation in Cyprus:

• The Domicile received at birth is referred to as the domicile of origin (mostly dependent on the father side) and,
• The Domicile of choice – a domicile obtained by establishing physical presence in a certain location and proving sufficient desire to make it the permanent abode.

Cyprus Tax Residency:

In order to obtain the Non-Domiciled Status for non Cypriot nationals, you will need to obtain the Tax Residency first. Under Cyprus legislation, an individual must spend a minimum of 183 calendar days in the Republic of Cyprus to be classified as a Cypriot tax resident. However, a new rule has been introduced that allows individuals to obtain Cyprus tax residency by spending only 60 days in the country, subject to certain conditions.

TIP: In case you are domiciled in Cyprus due to your birth in the country (i.e. by origin), you can still be eligible for non-domiciled status under two circumstances:

1. If you have established a domicile of choice outside Cyprus, and you have not been a tax resident in Cyprus for at least 20 consecutive years prior to the current tax year, you may be eligible for non-domiciled status.
2. If you were not a tax resident in Cyprus for at least 20 consecutive years prior to the introduction of the non-domicile requirements (i.e. between the years 1995 and 2014), you may also qualify for non-domiciled status in Cyprus.

What are the Tax Benefits of Non-Domiciled in Cyprus?

When foreigners relocate their personal tax residency to Cyprus, they are considered non-domiciled in Cyprus. As a result, non-domiciled individuals who achieve tax residency in Cyprus are exempt from paying the Special Defense Contribution (SDC) in Cyprus. The Special Defense Contribution (SDC) tax is generally applicable to income from dividends and interest, but does not apply to non-domiciled individuals, making their income completely tax-free. As these two types of income are often the main source of income for high net worth individuals, Cyprus is becoming increasingly attractive as a relocation destination in 2023.

*Since 2020, dividends income received by non-domiciled individuals in Cyprus is subject to a General Health System contribution at a rate of 2.65%, with a maximum restriction of EUR 180,000 in annual income.

Also Cyprus has a wide range of double tax treaties with other countries, which can provide further tax benefits to non-domiciled individuals. These treaties are designed to prevent double taxation on income earned in both Cyprus and another country, ensuring that foreign individuals are not subject to tax twice on the same income.

Other Tax Benefits

• Profits from the sale of shares and other qualifying titles are exempt from taxation, but this exemption does not apply to immovable property.
• The first EUR 19,500 of taxable income is tax exempt, providing significant savings for non-domiciled individuals in Cyprus.
• Cyprus offers a wide range of personal tax deductions and allowances, allowing for further tax savings.
• Non-Cypriot residents who were employed outside of Cyprus before the commencement of their employment are eligible for a 50% exemption from remuneration for employment exercised in Cyprus.
• 100% exemption is offered on remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to non-Cypriot resident employers.
• A 20% exemption is available from capital gains tax on profits from immovable property acquired before 2017.
• Pension received in respect to past employment abroad is taxed in Cyprus at a flat rate of only 5%, but only for amounts exceeding EUR 3,420.
• Cyprus offers a 100% exemption on repayments from life insurance schemes or approved pension funds.
• Non-domiciled individuals can benefit from no capital gains taxes on the sale of immovable property located outside Cyprus.
• There is no inheritance tax or wealth tax in Cyprus, making it a highly attractive destination for individuals seeking tax efficiency.
• Beneficiaries to a trust are exempted from tax, as long as the income derived from the trust is in the form of dividends or interest.

Tax Lawyers in Cyprus – AVZ Law Office

At our office, we provide a range of services to help you relocate your personal tax residency to Cyprus with ease. Whether you’re looking for tax advice, accounting services, or assistance with residency permits, we’re here to help. Our services include:

• Assistance with the application process for permanent or temporary residency permits in Cyprus
• Tax advice and planning to help you make the most of Cyprus’s tax advantages
• Help with filling out the necessary documents to obtain a tax certificate
• Assistance with filing relevant documents to the authorities
• Accounting & Auditing services through our trusted associates
• Help finding a property to rent or buy in Cyprus
• Assistance with drafting, translating, or apostilling legal documents
• Examination of your circumstances to determine if you meet the requirements for tax certification
• Assistance with registering a company in Cyprus and setting up tax structures for dividends, royalties, capital gains, and interest income
• Help opening bank accounts in Cyprus and registering with various authorities like Social Insurance and VAT.

By providing these comprehensive services, we aim to make your move to Cyprus as smooth and stress-free as possible. Contact us today to learn more about how we can help you achieve your financial goals in Cyprus.