Cyprus Non-Dom Regime: A Tax-Efficient Haven for International Individuals

Kouzalis LLC is please to provide an overview of the Cyprus Non-Dom regime in Cyprus. This regime offers significant tax advantages to individuals who meet certain residency and domicile criteria.

Understanding the Cyprus Non-Dom Regime

The Cyprus Non-Dom Regime, introduced in 2015. Furthermore, is a tax framework design to attract high-net-worth individuals and international professionals. That to establish their tax residency in Cyprus. Also, this regime offers substantial tax exemptions on certain types of income for individuals who are consider tax residents of Cyprus. But are not domicile in the country.

Key Benefits of the Non-Dom Regime

The primary advantage of the Cyprus Non-Dom status lies in the exemption from the Special Defense Contribution (SDC) tax. The SDC is a tax impose on Cyprus tax residents who are also domicile in Cyprus, applying to passive income sources such as dividends, interest, and rental income. For non-domiciled individuals, however, these income sources enjoy significant tax benefits:

1. Dividend Income: Both local and foreign-sourced dividends are completely exempt from SDC tax for non-dom individuals. This exemption can result in substantial tax savings, especially for those with significant investment portfolios.
2. Interest Income: Interest earned from both Cyprus and foreign sources is exempt from SDC tax. This benefit is particularly attractive for individuals with considerable savings or those engaged in lending activities.
3. Rental Income: Non-dom individuals are not subject to SDC tax on their rental income, whether derived from properties in Cyprus or abroad. This exemption can be highly beneficial for those with real estate investments.

It’s important to note that while these income sources are exempt from SDC tax, they may still be subject to other taxes, such as income tax. However, the overall tax burden is significantly reduce compare to domicile residents.

Qualifying for Non-Dom Status

To benefit from the Non-Dom Regime, an individual must meet specific criteria related to tax residency and domicile status.

Tax Residency Requirements

An individual is consider a tax resident of Cyprus if they meet either of the following conditions:

1. The “183-day rule”: The individual stays in Cyprus for at least 183 days in any calendar year.
2. The “60-day rule”: The individual stays in Cyprus for at least 60 days in the tax year and satisfies all of the following conditions:
   • Does not stay in any other country for more than 183 days in the same tax year
   • Is not a tax resident of any other country for the same tax year
   • Has other define Cyprus ties (e.g., carries out business activities in Cyprus, maintains a permanent residence, or is employ in Cyprus)

Domicile Requirements

The concept of domicile in Cyprus tax law is based on the principles of the Wills and Succession Law. There are two types of domicile:

1. Domicile of Origin: This is the domicile a person receives at birth, typically the domicile of the father.
2. Domicile of Choice: This is acquired by establishing a home with the intention of permanent or indefinite stay.

An individual with a domicile of origin in Cyprus will be considered domiciled in Cyprus for tax purposes unless:

• They have acquired and maintained a domicile of choice outside Cyprus for at least 20 consecutive years prior to the tax year in question, or
• They were not a Cyprus tax resident for at least 20 consecutive years immediately prior to the introduction of the non-dom regime (16 July 2015).

Moreover, regardless of domicile of origin, an individual who has been a tax resident of Cyprus for at least 17 out of the last 20 years prior to the tax year in question will be deemed domiciled in Cyprus for SDC tax purposes.

Implications for International Individuals

The Cyprus non-dom regime offers a highly attractive tax environment for international individuals. By meeting the residency and domicile requirements, individuals can enjoy significant tax savings on their investment income.

Kouzalis LLC can provide expert advice and assistance to individuals considering the Cyprus non-dom regime. Our team of tax professionals can help you understand the specific requirements and benefits of this regime and determine if it is suitable for your circumstances.