Natalie The non-dom status in Cyprus has seen much traction over the last few years, as more Brits and high-net-worth individuals from European countries flock to take advantage of the country’s tax regime. Of course, the island already wins fame for the beautiful beaches, warm climate, and high-quality healthcare, but it can also help your bottom line if you become a non-dom resident.
“Non-dom”, or “non-domiciled individuals”, refers to a special tax status. If someone is non-dom, they are a resident but not domiciled there for tax savings. This benefits various income sources, including wealth and inheritance taxes. The non-dom status is viral among wealthy individuals with substantial income or assets abroad.
To qualify for Non-Domicile Status by the tax authorities, individuals must demonstrate a domicile of choice, which means their permanent residence is outside Cyprus. This is the domicile of origin, typically linked to one’s birth country. Individuals who have lived abroad continuously for 20 years also become non-Cyprus residents.
More About the Non-Dom Status in Cyprus
Criteria for Residency
The 183-day and 60-day rules determine residency for non-domiciled persons.
- Under the 183-day rule, an individual is a tax resident if they spend at least 183 days in the country during a calendar period. This straightforward criterion requires physical presence in the country.
- The 60-day residency route applies if the applicant spends at least 60 days in Cyprus within a year, is not a tax resident in any other country, and has substantial business activities. These ties include owning or renting property, employment contracts, or doing business as a Cypriot resident.
The 183-Day Rule impacts overall obligations, including income rates and reporting requirements. In contrast, the 60-Day Rule provides an alternative pathway if they are not tax residents in another jurisdiction.
While the 183-day Route is straightforward, the 60-day Rule offers flexibility. To be eligible, a person must maintain a permanent residential property in the country, and not reside in any other country for more than 183 days during the same year.
Advantages of the Non-Domicile Status
Exceptional Defence Contributions (SDC): Under this status, non-domiciled residents don’t pay outstanding defence contributions to various types of income for up to 17 years. SDC is paid on worldwide dividend income, sale of shares, interest, and rental income. This benefit applies to bank deposit interest, passive interest, and rental income, irrespective of origin or destination.
Corporate Rates on Net Profits: Cyprus’s competitive corporate rate of just 12.5% is one of the lowest tax liabilities in the European Union.
Capital Gains: People with Non-Domiciled Status are not subject to capital gains on profits from foreign assets, except for gains on immovable property.
Double Taxation Treaties: Cyprus has established extensive double taxation treaties (DTTs) with 65 countries. For instance, many exemptions with countries like the UK and Russia lower withholding rates to as low as 5% or even exempt them entirely.
Cyprus Income tax and Pensions: Residents’ annual income is taxed at progressive rates, with foundational tax-free allowances of €19,500 per Year. Dividends are generally exempt from personal income tax. So, non-Dom residents maximise their earnings through dividend payments, lowering their overall taxable earnings on worldwide income. Meanwhile, pensions are tax-free, up to €3,420 per tax year, and the excess is 5%.
Expenditure and other taxes: Certain expenses, including lower social insurance contributions and personal tax credits, also contribute to the tax benefits.
Estate and Inheritance Tax: Cyprus offers significant estate and inheritance advantages. There is no inheritance tax, and estate duty was abolished in 2000. So, individuals can pass on wealth to future generations without worrying about excessive burdens.
Getting the Non-Domicile Status in Cyprus
Procedures are different, depending on whether you apply as an individual or a company. Still, applicants must get a tax number (TIN) and the resident status according to the 60-day or 183-day rules. Then, submit the documents and receive the official status upon approval.
More Information About Being a Non-Dom Resident
We are Spot Blue International, and we have won many international property awards for our excellent investment services. If you are thinking of buying real estate in Cyprus and would like to know more about the non-dom status in Cyprus, contact us today.
We have helped many international residents with their foreign investments, and this choice of destination is climbing in popularity. The beautiful island has much to offer, and you can see our property gallery here. Listing many apartments and villas for sale that could become your primary residence, use the contact details to learn more or arrange viewings. Alternatively, for more advice on residency and buying property, call and chat with an agent today.
