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The Cyprus Non-Domicile concept for tax purposes 

The domicile concept
 
Foreigners, who decide to move their personal tax residency in Cyprus, will automatically be considered as non-domiciled in Cyprus for a maximum of 17 years.
 
For tax purposes, non-domicile persons who become Cyprus tax residents will now be fully exempt from Special Defence Contribution tax (‘’SDC’’).
 
SDC generally applies on dividends and interest. As SDC tax does not apply in the case of Cyprus tax resident individuals who are non-domiciled in Cyprus, dividend and interest earned by such persons will now be completely tax exempt in Cyprus. It is noted that the main income of high net worth individuals is generally dividends and interest.
 
Cyprus tax residency

Cyprus tax residency for individuals is determined by the number of days spent in the island during a calendar year (183 days test). Cyprus tax residents are taxed on their worldwide income (with credit given on foreign tax suffered against the Cyprus tax resulting from the same income).
 
Definition of Non-Domiciled persons
 
In accordance with the provisions of the Wills and Succession Law, there are two types of domicile:
 
Domicile of origin, i.e.: the domicile received at birth (generally dependent on the father side), or
domicile of choice, i.e.: domicile acquired by establishing physical presence in a particular place and by demonstrating sufficient intention to make it the place of permanent residence.
 
Irrespective of the domicile of origin or choice, individuals who have been tax resident in Cyprus for at least 17 out of the last 20 years prior to the tax year in question, will be deemed to be domiciled in Cyprus for the purposes of the SDC Law.
 
In the case of persons who have their domicile of origin in Cyprus, they will nevertheless be considered as non-domicile in the following cases:

• If they have acquired and maintain a domicile of choice outside Cyprus, provided that they were not tax residents in Cyprus for any continuous period of at least 20 consecutive years prior to the tax year in question; or
• If they were not tax resident in Cyprus for a period of at least 20 consecutive years immediately prior to the entry into force of the non-domicile provisions (i.e. between the years 1995 and 2014 inclusive).

 
Tax benefits of Non-Domiciled persons
 
As per the provisions of the Cyprus SDC Law, dividends and bank deposit interest earned by individuals who are tax resident in Cyprus are subject to SDC tax at the rate of 17% and 30% respectively, regardless of the source of the income (i.e. from Cyprus or from abroad). SDC tax applies only for individuals who are both Cyprus tax resident and domiciled in Cyprus.
 
Therefore, non-domiciled tax residents will have dividend and interest completely tax exempt in Cyprus.
 
Other Cyprus tax advantages for individuals
 

• Dividends and interest are exempt from Cyprus income tax and subject only to SDC in the case of domiciled tax residents. 

• Profit from the sale of shares and other qualifying title is specifically exempt from Cyprus taxation, provided that the underlying assets do not include immovable property located in Cyprus. 

• First € 19,500 of taxable income is tax exempt. Any taxable income in excess of this amount is taxed at progressive rates ranging from 20% to 35% (for taxable incomes over € 60,000). 

• In case of Cyprus remuneration which is less than € 100,000 a 20% exemption is granted, up to a maximum of € 8,550, for a period of 5 years commencing from the 1^st January of the year following the year of employment, and until year 2020.

 
In case you are interested in finding out more regarding the Cyprus non-domicile concept, or obtaining Cyprus tax residency, please contact our associate, Panos Votsis at pvotsis@oneworldweb.net  for a complimentary consultation.