ARTICLE
26 November 2024

Overview Of The Cyprus Non-Domicile (Non-Dom) Program

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GRATA International

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GRATA International is a dynamically developing international law firm which provides services for projects in the countries of the former Soviet Union and Eastern Europe. More than 28 years 250 professionals in 19 countries advise major international and local firms. GRATA is recognised by Chambers & Partners, Legal 500, IFLR1000, WWL, Asialaw Profiles. GRATA is recognised by Chambers & Partners, Legal 500, IFLR1000, WWL, Asialaw Profiles.
Launched in 2015, the Cyprus Non-Domicile (Non-Dom) Program offers unique and attractive tax incentives to individuals relocating to Cyprus while maintaining their non-domiciled status. This initiative
Cyprus Tax

1. Introduction to the Cyprus Non-Dom Program

  • Overview:
    Launched in 2015, the Cyprus Non-Domicile (Non-Dom) Program offers unique and attractive tax incentives to individuals relocating to Cyprus while maintaining their non-domiciled status. This initiative aims to attract global talent, professionals, entrepreneurs, and high-net-worth individuals (HNWIs).
  • Objective:
    To foster economic growth by offering an enticing tax and residency framework that positions Cyprus as a prime destination for investors and expatriates.

2. Why Choose Cyprus?

  • Strategic Location:
    Cyprus, located at the crossroads of Europe, Asia, and Africa, serves as a strategic hub for business, finance, and investment. Its geographic positioning allows easy access to key global markets.
  • Competitive Tax Regime:
    Cyprus is renowned for its low and favorable tax rates, providing an attractive environment for businesses and individuals seeking tax-efficient residency options.
  • Residency & Tax Benefits:
    The Non-Dom Program offers world-class tax advantages, making Cyprus an appealing choice for international professionals, retirees, entrepreneurs, and investors.

3. Key Features of the Cyprus Non-Dom Program

  • Who Qualifies as a Non-Domiciled Individual?
    Non-domiciled status applies to individuals who:
    • Havenot been tax residents in Cyprusfor at least 17 out of the last 20 years.
    • Wereborn outside Cyprusor have adomicile of originelsewhere (e.g., not Cypriot).
  • The Non-Dom Advantage:
    Non-domiciled individuals can benefit from tax exemptions on various income streams, including dividends, interest, and capital gains.

4. Tax Benefits of the Cyprus Non-Dom Program

  • 1.Attractive Personal Tax Incentives:
    Cyprus offers a range of tax benefits tailored to expatriates and high-net-worth individuals:
    • Exemption from taxes on dividends and interestfor non-domiciled individuals.
    • No capital gains taxon shares, funds, and bonds.
  • 2.Exemptions from Special Defense Contribution (SDC):
    Non-doms are exempt from SDC, which typically applies to:
    • Dividends:17% for residents.
    • Interest Income:30% for residents.
    • Rental Income:3% on 75% of gross rent for residents.
  • 3.Income Tax Exemptions for High Earners:
    • 50% exemptionon annual earnings over €100,000 (soon to be reduced to €50,000).
    • A 10-year (soon to be 17-year) tax exemptionfor high earners who have been non-residents for at least three of the last five years.
  • 4.No Wealth or Inheritance Tax:
    Cyprus does not impose wealth or inheritance taxes, allowing for more favorable wealth accumulation and transfer.

6. Corporate Tax Benefits

  • Low Corporate Tax Rate:
    Cyprus boasts one of the lowest corporate tax rates in Europe at just12.5%, providing an advantageous environment for businesses.
  • Tax-Free Dividends for Non-Dom Shareholders:
    Non-doms benefit from tax-free dividends, further enhancing Cyprus as a tax-efficient jurisdiction for investors and business owners.
  • Double Taxation Treaties:
    Cyprus has signed double taxation agreements with over60 countries, facilitating international tax planning and reducing the risk of being taxed twice on the same income.

7. Residency Rules & Flexibility

  • Tax Residency Criteria:To become a tax resident of Cyprus, individuals must meet one of the following criteria:
    • 183-Day Rule:Spend at least 183 days in Cyprus during a tax year.
    • 60-Day Rule:
      • Spend a minimum of 60 days in Cyprus per year.
      • Maintain no residency in another country for more than 183 days.
      • Have business or economic ties to Cyprus (e.g., employment or property ownership).
  • Flexible Residency Options:
    The 60-day rule allows for greater flexibility, making the Cyprus Non-Dom Program especially attractive to digital nomads, retirees, and individuals with flexible lifestyles.

8. Who Benefits from the Cyprus Non-Dom Program?

The program is ideal for a variety of individuals and groups, including:

  • Entrepreneurs & Investors:Seeking a tax-efficient European base to manage their assets and businesses.
  • High-Net-Worth Individuals (HNWIs):Aiming to minimize their tax liabilities and protect their wealth.
  • Digital Nomads & Remote Workers:With flexible residency rules aligning with the modern remote working lifestyle.
  • Retirees & FIRE Enthusiasts:Benefiting from tax-free foreign dividends, interest income, and a low-cost living environment.

9. Step-by-Step Application Process

To apply for the Cyprus Non-Dom status, follow these key steps:

  • 1.Obtain a Residency Permit:
    • Apply for a residency permit, such as the Cyprus Permanent Residency or Investment Program.
  • 2.Establish Tax Residency:
    • Fulfill either the 183-day rule or the 60-day rule to qualify as a tax resident.
  • 3.Apply for Non-Dom Status:
    • Submit application for non-domiciled status to the Cyprus Tax Department, providing necessary documentation.

10: Summary & Key Takeaways

  • Cyprus Non-Dom Programis an excellent opportunity for international investors, professionals, and retirees seeking:
    • Low taxes on income, dividends, and capital gains.
    • No inheritance or wealth taxes.
    • Corporate tax incentiveswith tax-free dividends for non-domiciled shareholders.
    • Flexibility in residency options,with tax residency achievable via the 183-day or 60-day rule.
    • Attractive for:Entrepreneurs, HNWIs, digital nomads, retirees, and anyone looking to optimize their global tax strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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