The non-domicile regime Cyprus is an important opportunity for foreign investors who want to optimize their tax setup.
If you need help with optimizing your tax setup, reach out to me!
What is the Cyprus Non‑Domiciled Regime (Non‑Dom)
The Cyprus non-domiciled regime is one of Europe’s most attractive tax regimes for individuals with an international lifestyle.
The reason for this is that tax residency in Cyprus allows you to avoid tax on most foreign passive income (e.g. dividends and interest).
Furthermore, you don’t have to pay the Special Defence Contribution (SDC) which applies to different sorts of income from domiciled individuals.
Individuals domiciled in Cyprus do have to pay tax and SDC on their worldwide income.
Who Qualifies as a Non‑Dom in Cyprus
You can qualify as a non-domiciled person in Cyprus if you meet two criteria:
- You were not born in Cyprus (domicile by origin); and
- You didn’t qualify as a tax resident in Cyprus for at least 17 out of the last 20 years (domicile by choice).
So, as long as your domicile is not in Cyprus you are good to go.
Many people mix up domicile with tax residency. Yet, the two are different concepts although they both have tax implications.
There are two ways how you can become a tax resident in Cyprus:
- Spend more than 183 days on Cyprus during the calendar year (183-day rule);
- Spend at least 60 days on Cyprus during the calendar year while meeting some additional requirements (60-day rule):
- Not reside in any other country for more than 183 days
- Not be considered tax resident of another country
- Have a residential address in Cyprus (rented or owned)
- Carry out business in Cyprus as a self-employed individual or director or employee of a local business.
Definitely in case you opt for the second option it’s important that you keep the necessary proof of meeting the criteria.
In order to reap the benefits of the non-domiciled regime you need to qualify as a tax resident of Cyprus while also meeting the criteria for not having your domicile in the country.
Yet, most foreigners moving to the country will qualify for the non-domicile regime Cyprus.
Tax Benefits of the Non‑Dom Regime
If you have your domicile in Cyprus, you have to pay a Special Defence Contribution on certain types of income:
- Rental income: 2,25%
- Dividends: 17%
- Interest: 17%
- Interest from government bonds of bonds listed on a recognized exchange: 3%
SDC replaces income tax for dividends and interest income.
Accordingly, the main benefit that non-domiciled individuals have is that they get an exemption from the SDC payments.
Consequently, individuals under the non-domicile regime don’t pay any tax on dividends or interest.
Furthermore, Cyprus doesn’t have a capital gains tax except for local real estate.
Nevertheless, there is a General Health System (GHS) contribution of 2,65% on passive income like rent, dividends and interest.
How to Become a Tax Resident in Cyprus and Get the Non‑Dom Status
In order to benefit from the non-domicile regime Cyprus you need to qualify as a Cypriot tax resident first. Let’s check out how to make that happen.
Meet Tax Residency Requirements
In order to become a tax resident in Cyprus, you need to meet one of the criteria for tax residency discussed before:
- Spend more than 183 days in Cyprus during the year; or
- Spend at least 60 days in Cyprus during the year while maintaining other connections as well.
Register with Tax Authorities
Now you can register online with the Cypriot tax authorities via the official website TaxForAll.
You can create a new account there. In the process, you’ll have to share some personal details and documents. One of the documents you need to upload is your Registration Certification from the immigration office (‘yellow slip’ or ‘pink slip’).
Getting Non-Dom Status in Cyprus
Check if you meet the eligibility criteria for the non-dom status. As a foreigner this means you can’t have been a tax resident of Cyprus for 17 out of the last 20 years.
Once you are registered with the Cypriot Tax Department, you can claim your non-dom status upon filing your tax return.
Yet, you won’t get any certificate to prove your non-dom status.
Maintaining Cypriot Non-Dom Status
The requirements for maintaining your non-dom status in Cyprus are similar to the ones for getting it in the first place:
- Remain a tax resident of Cyprus
- Comply with tax reporting
- Avoid domicile by choice
So, if you do everything right, you could loose your non-domiciled status only by having been a tax resident of Cyprus for 17 out of the last 20 years.
Therefore, you can benefit from it for quite a while before losing your beneficial status.
Request Tax Residency Certificate
Finally, you can obtain a tax residency certificate confirming your tax residency in Cyprus.
In order to get this certificate you will need to fill out the application form and add any relevant documents.
Is Cyprus Non‑Dom Status Right For You?
The non-domicile regime Cyprus is ideal for individuals who want a flexible tax residency that doesn’t tax foreign investment income.
Yet, even if your main income source is professional income, Cyprus is still worth considering.
If you open a company in Cyprus, you can benefit from their flat 12,5% corporate tax rate. This is one of the lowest rates in Europe.
Get in touch if you want to discuss if Cyprus is the right fit for you or if you want to explore other alternatives.