The Cyprus Non Domiciled Tax Resident Individual

Advantages and Conditions

Background

Since July 2015 the concept of Non-domiciled Individuals for tax purposes was introduced.

Consequently, Cyprus tax resident individuals,  who are also  non Cyprus domiciled,  are now able to  enjoy the following  additional tax advantages :

  • No tax on Dividend income
  • No tax on Interest Income  
  • Rental income : partly exempt  (only subject to Income Tax at normal rates)

Note : Since 1 March 2019,  the above types of income are subject to GeSY  contributions , (currently at the rate of 1.7%),  restricted to a maximum of EUR180,000 income annually

Cyprus Tax Residency

For tax purpose, an individual is considered to be a Cyprus tax resident if he/she is physically present in Cyprus for more than 183 days in a calendar year.

Alternatively, as of 1st January 2017, under the ‘60 day rule’, an individual can be considered as a Cyprus tax resident provided that he/she does not spend more than a total of 183 days in any State within a tax year and is not a tax resident of another State within the same tax year and satisfies the following three conditions:

  • Remains in Cyprus for at least 60 days in the tax year
  • Carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident person at any time during the tax year and
  • Maintains a permanent home in Cyprus that is either owned or rented

Cyprus Non-Domiciled Status

In general, individuals can be deemed as non-domiciled if they have not been born in Cyprus (“domicile of origin” is outside of Cyprus”) or have not lived in Cyprus for at least 17 consecutive years (“domicile of choice”)

Taxation of Cyprus tax residents

A Cyprus tax resident individual is subject to Cyprus Income Tax (CIT) on all his worldwide income and is also subject to Cyprus Special Defense Contribution (SDC) on his passive income from dividends, interest and rentals.

The SDC Law also includes provisions for the deemed distribution of profits of Cypriot tax resident companies to the extent that the shareholders (beneficiaries) of such companies are Cyprus tax resident individuals.

Since 1 March 2019, contributions to the General Health System (known as GeSY), is applicable on various sources of income in respect of all  Cyprus tax resident individuals.

Exemption from SDC for non-domiciled Cyprus tax residents

With effect from July 2015, Cyprus tax resident individuals who are non-Cyprus domiciled, are effectively exempt from being taxed in Cyprus on their income from dividends and interest, and partly exempt from tax on their income from rentals, from worldwide sources including Cyprus.

Note: These individuals are tax residents in Cyprus and they are subject to Cyprus taxes on all their other worldwide income, subject also to the provisions of relief from double taxation applicable in Cyprus either as per Treaties or unilaterally.

Tax benefits of  a Cyprus tax resident

Obtain Cyprus tax residency  and enjoy the following additional benefits:

  • no tax on gains arising from the disposal of investments (shares, bonds, etc)
  • no withholding tax on the repatriation of income as dividends, interest and royalties
  • extensive double tax treaty network
  • income tax exemptions for taking up employment in Cyprus up to fifty percent of the remuneration for 10 years for employment income of more than €100,000 per annum
  • low social insurance contributions
  • no tax on worldwide dividend and interest income for non-domiciled individuals for 17 years (except for minimal GeSY contributions as outlined above)
  • no tax on retirement gratuity and special tax regime on foreign pension income
  • no estate duty, wealth tax, gift tax or inheritance tax

Other reasons to choose Cyprus

  • comfortable clime and pleasant lifestyle
  • geographical location, being at the crossroads of three continents – Europe, Asia and Africa
  • EU Member State with a stable economy
  • low tax rates and no inheritance tax
  • legal system based on English common law
  • English language is widely spoken and is the accepted language for business
  • high level and mature professional services industry
  • access to reputable private and public schools
  • low cost of living
  • high quality healthcare

The contents of this article should be considered to be of a general nature only not referring to any particular business.  Before proceeding with any action, please request further advice relating specifically to your business.  We will be very pleased to be of assistance.

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