Non-Domiciled Concept in Cyprus
Cyprus introduced the concept of Non-Domiciled individuals for tax purposes in July 2015. This introduction aims to constitute Cyprus as a prime choice of destination for persons (both EU and non-EU) that consider moving their personal tax residency to another country.
The non-domicile concept is great for individuals who have a foreign income and businesses in other countries because it offers significant tax advantages.
So individuals who have acquired a tax certificate from Cyprus tax authorities they will automatically be considered as non-domiciled for a maximum period of 17 years (in 17 years they will become domiciled).
Definition of non-domiciled person:
We can find the definition of non-domiciled in the provision of Cyprus Wills and Succession Law.
There are two kinds of domicile:
- Domicile of origin – the domicile received at birth (generally dependent on the father side)
- 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
If you have your domicile of origin in Cyprus, don’t worry you can still be considered as non-domiciled in the following cases:
- If you 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
- If you 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 (between the years 1995 and 2014 inclusive).
As you may already know in Cyprus dividends income is exempted from taxes but there is another sort of tax that is called Special Defense Contribution (SDC). The rates on SDC are 17% on Dividend income and 30% on interest income.
However dividend income, rental income and interest income from bank accounts is exempt for taxation under SDC for the ‘’non domicile’’ individuals. So a non-domiciled individuals in Cyprus is able to receive dividend and interest income completely tax exempted.
Furthermore foreigners becoming tax residents also enjoy many other significant tax advantages (both domiciled and non-domiciled).
- 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%.
- Profit from sale of shares and other qualifying titles is specifically exempt from Cyprus taxation, provided that the underlying assets do not include immovable property located in Cyprus.
- 50% exemption for remuneration from employment exercised in Cyprus by persons who were resident outside Cyprus before commencement of their employment. The exemption applies for 10 years commencing from the year of employment, if such income exceeds €100,000 per year.
- 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 1st January of the year following the year of employment, and until year 2020.
- 100% exemption on remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer.
- In case of Cyprus immovable property acquired up to 31st December 2016, profit from subsequent future disposal of such property will be exempt from the 20% Capital Gains Tax.
- Pension received in respect of past employment outside Cyprus is taxed in Cyprus at the flat rate of 5% for amounts in excess of €3,420.
- 100% exemption on lump sum repayments from life insurance schemes or from approved provident funds.
Anti Avoidance Rules Benefit:
For individuals who are directors or senior managers in a Cyprus company, the physical relocation of that person to Cyprus will enhance the substance requirement as it would reinforce the Cyprus management and control activities and it would be easier to prove that this company is not a conduit company that was registered in Cyprus just to enjoy tax benefits.
Tip: Furthermore, each person who considers moving his personal tax residency to Cyprus needs to ensure that, depending on the laws and practices of his current tax jurisdiction, he will stop being a tax resident in that other country.
If you are interested in acquiring a tax certificate in Cyprus or moving your business to Cyprus you can contact us to discuss the details.
How we can assist:
- Tax advice and tax planning
- Advise and assist the applicant to complete the application procedure
- Permanent or Temporary residence permit in Cyprus
- Fill the necessary documents to acquire the tax certificate
- Fill and file the relevant documents for you to the authorities
- Accounting Services (via our associates)
- Finding a property for you to rent or buy in Cyprus
- Drafting, translating or apostille legal documents
- Conduct an examination of the applicant’s circumstances and give an advice if the requirements of the tax certification are being met
- Registering a company in Cyprus (Tax structures for dividends, royalties, capital gains, interest income)
- Open bank accounts in Cyprus and also register with different authorities like Social Insurance, VAT etc.
Anything else you may need just ask.
Contact details:Phone number: +357 97680423 (Available also on Whatsup)
Email: [email protected]
Or book an Appointment for a live discussion (available video call option)