The Cyprus Non-Domicile (Non-Dom) Tax Regime stands out as a highly attractive option for expatriates and high-net-worth individuals (HNWIs) seeking to efficiently manage their global tax liabilities. Cyprus on the whole offers a wide range of financial and fiscal incentives and a robust legal framework in a business-friendly environment.
Understanding the Cyprus Non-Dom regime
The Cyprus Non-Dom regime enables advisers to craft efficient wealth strategies for individuals to benefit from tax exemptions on foreign income while ensuring compliance with international standards, key attributes are:
- No income tax on foreign income: Dividends, interest, and capital gains from foreign sources are tax-free, provided they remain outside Cyprus.
- No Wealth Transfer Taxes: The absence of inheritance, wealth, and gift taxes simplifies long-term planning for families.
- Competitive Corporate Tax Rate: At 12.5%, Cyprus offers one of the lowest rates in the EU, making it attractive for structuring business entities.
- Foreign Asset Disposal: Gains from non-Cypriot assets are not taxed, making it ideal for globally diversified holdings.
These features allow advisers to create tax-efficient solutions for clients while ensuring compliance with international standards.
This feature, coupled with the country’s absence of inheritance, wealth, and gift taxes, or capital gains tax * creates a uniquely advantageous environment for long-term wealth preservation and intergenerational planning.
As is the case across much of the world, individuals are taxed in Cyprus if they are deemed resident – but a Cyprus non-dom’s income can fall outside the local tax-net if it meets the necessary criteria and is adequately structured.
Read More: Tax Considerations for HNWIs when Relocating
What is Cypriot domicile?
According to the wills and succession laws, domicile is defined either by origin, which is acquired at birth, or by choice, which is established when an individual sets up a home with the intention of staying indefinitely or permanently.
In Cyprus, individuals are taxed only on their income and through a unique withholding tax called the special defence contribution (SDC). An individual who has been a tax resident in Cyprus for at least 17 out of the 20 years prior to a given tax year is considered domiciled in Cyprus for SDC purposes. A Cyprus-domiciled tax resident is subject to a 17% tax rate on interest and a 30% tax rate on dividends under the SDC law. Rental income is also taxed at a rate of 3% on 75% of the gross amount.
The Cyprus Non-Dom regime in a nutshell
In July 2015, Cyprus introduced the “Domicile” concept to enhance its appeal as an international business and financial hub and to make its tax system more competitive, fair, and straightforward. This change was made through an amendment to the Special Contribution for the Defence of the Republic of Cyprus Law of 2002 (SDC Law), which governs the Non-Domiciled (Non-Dom) tax regime. From 1 January 2017, Cyprus updated its tax residency rules further to include individuals who are not tax residents in any other country within the same year and set out specific criteria to be eligible.
The 60-Day Rule
Under the 60-Day rule, individuals qualify if they:
- Spend at least 60 days in Cyprus during the year,
- Are employed, conduct business, or hold an office in a Cyprus tax-resident company during the year, and
- Own or lease a permanent home in Cyprus.
However, if the individual ceases their business, employment, or office in Cyprus during the year, they will not qualify as a Cyprus tax resident for that year.
The 183-Day Rule
Under the 183-Day rule, individuals qualify if they:
- Are physically present for more than 183 days in Cyprus within a calendar year (1 January to 31 December);
- On the contrary if they spend less than 183 days in Cyprus within the year, they are classified as a non-tax resident of Cyprus for that year.
A growing need for non-dom solutions
In today’s volatile global tax environment, non-dom solutions have become increasingly attractive for those seeking stability, efficiency, and compliance. Many jurisdictions are raising tax rates and intensifying regulations, prompting HNWIs and expatriates to explore alternative options. The Cyprus Non-Dom Tax Regime stands out as a solution tailored to meet these challenges, offering legal certainty, tax efficiency, and a supportive business framework.
The regime’s appeal has grown amid increasing scrutiny of international tax practices. For globally mobile individuals, the flexibility offered by Cyprus is invaluable. The country’s clear eligibility criteria and stable regulatory environment provide peace of mind, while its extensive double tax treaty network ensures protection against double taxation and minimizes overall tax exposure.
Increased regulatory pressures and evolving tax policies globally are driving demand for reliable, efficient structures. The Cyprus Non-Dom regime provides, predictability, tax efficiency, and adaptability.
- Predictability: Clear rules and a dependable legal system offer stability for long-term plans.
- Tax Efficiency: Its extensive double tax treaty network minimizes double taxation risks.
- Customizability: The regime suits diverse client profiles, from entrepreneurs to retirees.
By incorporating these benefits into their advisory services, professionals can address client concerns and enhance value.
Lifestyle and strategic benefits
Beyond its tax advantages, Cyprus offers an exceptional quality of life. With its Mediterranean climate, rich cultural heritage, and English-speaking population, the island provides a welcoming environment for expatriates and their families. High-quality healthcare and education systems further enhance its appeal, while the relaxed yet business-oriented atmosphere makes it an ideal destination for professionals.
Strategically located at the crossroads of Europe, Asia, and Africa, Cyprus serves as a gateway for international trade and investment. The country’s EU membership ensures seamless access to European markets and regulatory frameworks, facilitating business operations across borders.
Additionally, Cyprus has emerged as a hub for innovation, supported by an IP Box regime offering effective tax rates as low as 2.5% on qualifying intellectual property income.
How to qualify for non-dom status in Cyprus
To qualify for non-dom status in Cyprus, individuals must meet specific residency requirements. The 183-day rule necessitates residing in Cyprus for over 183 days in a calendar year, while the 60-day rule provides an alternative for those who stay at least 60 days, do not reside elsewhere for over 183 days, and maintain business or property ties in Cyprus. Non-dom status is granted for up to 17 years, providing a long-term framework for tax planning and benefits.
Compliance is essential for maintaining non-dom status. Individuals must accurately report foreign income and assets, adhere to residency requirements, and claim the remittance basis where applicable. Professional advisory services are highly recommended to navigate these requirements and maximize the regime’s benefits.
Cyprus’s corporate tax rate, at just 12.5%, is among the lowest in the European Union. This is a significant draw for entrepreneurs and businesses looking to optimize their tax structures, especially when combined with the non-dom exemptions. Furthermore, Cyprus imposes no taxation on gains from the disposal of foreign assets, making it ideal for globally diversified portfolios.
Capitalize on the Cyprus Non-Dom tax regime
Cyprus uniquely blends financial incentives, legal certainty, and lifestyle advantages. Its extensive network of double tax treaties provides a foundation for efficient international tax planning, while its strategic location and supportive business environment position it as a hub for global entrepreneurs and investors. Whether you seek to optimize your tax position, secure your wealth, or enjoy a high standard of living, the Cyprus Non-Dom Tax Regime offers a comprehensive solution to achieve these goals.
