Non-Dom Regime

“Non-Domicile” Regime for individuals

In July 2015, the Ministers of Council passed a number of radical new laws aiming mainly to attract foreign investments and high-net-worth foreign individuals whilst at the same time to simplify Cyprus tax system. The amendments introduced are of utmost significance since the introduction of the current tax regime and are fully aligned with the international and EU tax and transparency requirements.

“Non-Dom” exemption rule for individuals

In accordance with the Cyprus Tax laws, an individual who is a tax resident of Cyprus under the provisions of the Income Tax Law (either under the 183 days rule or the 60 days rule) but is “non-domiciled” in the Republic of Cyprus, will be exempt from the Special Defence Contribution (SDC).

Under the SDC Law, dividends and interest income earned by individuals who are tax residents and domiciled in the Republic of Cyprus, are subject to a tax rate of 17% and 30% respectively, regardless of the source of income. Rental income is also subject to tax at the rate of 3% on 75% of the gross amount. On the other hand, under the amendments introduced in 2015, the individuals, who are tax residents but non-domiciled individuals in the Republic, can enjoy dividend, interest and rental income free from SDC tax in Cyprus.

Domiciled tax resident individual

Type of Income	Income Tax	SDC
Dividends	Exempt	Taxable at 17%
Interest	Exempt	Exempt
Rental Income	Taxable	Taxable at 3% on 75% of gross income

Non-Domiciled tax resident individual

Type of Income	Income Tax	SDC
Dividends	Exempt	Exempt
Interest	Exempt	Exempt
Rental Income	Taxable	Exempt

Definition of Non-Dom

The individual Cyprus tax resident will not be exempted from SDC if domiciled in Cyprus. The term “domiciled in Cyprus”, as per the provisions of the Wills and Succession Law, is when an individual is considered to have a domicile in the Republic of Cyprus either by domicile of origin (given at birth) or by domicile of choice (establishing a home with the intention to reside in Cyprus permanently or indefinitely). For the purposes of SDC, the following are exempted from the above definition (the “Non-Domiciled”)

An induvial who has acquired and maintained a domicile of choice outside Cyprus and is not a tax resident of Cyprus, as per the Income Tax Law, for the period of 20 or more consecutive years prior to the tax year in question.

An individual who has maintained his/her Cyprus domicile of origin status but was not tax resident of Cyprus for the period of 20 or more consecutive years prior the introduction of the new law i.e. before the 16th July 2015.

The 183 Day Rule

An individual is considered to be a Cyprus tax resident if he/she was physically present in Cyprus for a period, or an aggregated period, of more than 183 days during the calendar year.

The 60 Day Rule

In July 2017, the Income Tax Law was amended by adding a second tax residency test, the so-called the “60 Day Rule”. Under the “60 Day Rule”. an individual is now considered as a tax resident of Cyprus if, in the relevant tax year, he/she:

remains in Cyprus for at least 60 days in the year of assessment; and

is engaged in any business in Cyprus and/or is employed in Cyprus and/or holds an office (director) under a Cyprus tax resident company at any time during the year of assessment, provided that such is not terminated during the tax year; and

maintains a permanent residence in Cyprus (whether owned or rented).

The “60 Day Rule” allows an individual who in the relevant tax year (i) does not remain in any other country for more than 183 days in total, and (ii) who is not a tax resident in any other country, to be considered as a tax resident of Cyprus.

Encouraging economic activity

The introduction of the Non-Dom regime, had been widely acknowledged as the most attractive personal income tax regime in the entire tax world and it constitutes Cyprus as one of the best jurisdictions in the world as it entices high-net-worth individuals and corporate entities to take up residency in Cyprus and use Cyprus companies as part of their international tax planning.

Source https://atca.com.cy/