Overview of the Cyprus Non-Domicile (Non-Dom) Program

1. Introduction to the Cyprus Non-Dom Program

• Overview:
  Launched in 2015, the Cyprus Non-Domicile (Non-Dom) Program offers unique and attractive tax incentives to individuals relocating to Cyprus while maintaining their non-domiciled status. This initiative aims to attract global talent, professionals, entrepreneurs, and high-net-worth individuals (HNWIs).
• Objective:
  To foster economic growth by offering an enticing tax and residency framework that positions Cyprus as a prime destination for investors and expatriates.

2. Why Choose Cyprus?

• Strategic Location:
  Cyprus, located at the crossroads of Europe, Asia, and Africa, serves as a strategic hub for business, finance, and investment. Its geographic positioning allows easy access to key global markets.
• Competitive Tax Regime:
  Cyprus is renowned for its low and favorable tax rates, providing an attractive environment for businesses and individuals seeking tax-efficient residency options.
• Residency & Tax Benefits:
  The Non-Dom Program offers world-class tax advantages, making Cyprus an appealing choice for international professionals, retirees, entrepreneurs, and investors.

3. Key Features of the Cyprus Non-Dom Program

• Who Qualifies as a Non-Domiciled Individual?
  Non-domiciled status applies to individuals who:
  • Have not been tax residents in Cyprus for at least 17 out of the last 20 years.
  • Were born outside Cyprus or have a domicile of origin elsewhere (e.g., not Cypriot).
• The Non-Dom Advantage:
  Non-domiciled individuals can benefit from tax exemptions on various income streams, including dividends, interest, and capital gains.

4. Tax Benefits of the Cyprus Non-Dom Program

• 1. Attractive Personal Tax Incentives:
  Cyprus offers a range of tax benefits tailored to expatriates and high-net-worth individuals:
• • Exemption from taxes on dividends and interest for non-domiciled individuals.
  • No capital gains tax on shares, funds, and bonds.
• 2. Exemptions from Special Defense Contribution (SDC):
  Non-doms are exempt from SDC, which typically applies to:
• • Dividends: 17% for residents.
  • Interest Income: 30% for residents.
  • Rental Income: 3% on 75% of gross rent for residents.
• 3. Income Tax Exemptions for High Earners:
• • 50% exemption on annual earnings over €100,000 (soon to be reduced to €50,000).
  • A 10-year (soon to be 17-year) tax exemption for high earners who have been non-residents for at least three of the last five years.
• 4. No Wealth or Inheritance Tax:
  Cyprus does not impose wealth or inheritance taxes, allowing for more favorable wealth accumulation and transfer.

6. Corporate Tax Benefits

• Low Corporate Tax Rate:
  Cyprus boasts one of the lowest corporate tax rates in Europe at just 12.5%, providing an advantageous environment for businesses.
• Tax-Free Dividends for Non-Dom Shareholders:
  Non-doms benefit from tax-free dividends, further enhancing Cyprus as a tax-efficient jurisdiction for investors and business owners.
• Double Taxation Treaties:
  Cyprus has signed double taxation agreements with over 60 countries, facilitating international tax planning and reducing the risk of being taxed twice on the same income.

7. Residency Rules & Flexibility

• Tax Residency Criteria: To become a tax resident of Cyprus, individuals must meet one of the following criteria:
  • 183-Day Rule: Spend at least 183 days in Cyprus during a tax year.
  • 60-Day Rule:
    • Spend a minimum of 60 days in Cyprus per year.
    • Maintain no residency in another country for more than 183 days.
    • Have business or economic ties to Cyprus (e.g., employment or property ownership).
• Flexible Residency Options:
  The 60-day rule allows for greater flexibility, making the Cyprus Non-Dom Program especially attractive to digital nomads, retirees, and individuals with flexible lifestyles.

8. Who Benefits from the Cyprus Non-Dom Program?

The program is ideal for a variety of individuals and groups, including:

• Entrepreneurs & Investors: Seeking a tax-efficient European base to manage their assets and businesses.
• High-Net-Worth Individuals (HNWIs): Aiming to minimize their tax liabilities and protect their wealth.
• Digital Nomads & Remote Workers: With flexible residency rules aligning with the modern remote working lifestyle.
• Retirees & FIRE Enthusiasts: Benefiting from tax-free foreign dividends, interest income, and a low-cost living environment.

9. Step-by-Step Application Process

To apply for the Cyprus Non-Dom status, follow these key steps:

• 1. Obtain a Residency Permit:
  • Apply for a residency permit, such as the Cyprus Permanent Residency or Investment Program.
• 2. Establish Tax Residency:
  • Fulfill either the 183-day rule or the 60-day rule to qualify as a tax resident.
• 3. Apply for Non-Dom Status:
  • Submit application for non-domiciled status to the Cyprus Tax Department, providing necessary documentation.

10: Summary & Key Takeaways

• Cyprus Non-Dom Program is an excellent opportunity for international investors, professionals, and retirees seeking:
  • Low taxes on income, dividends, and capital gains.
  • No inheritance or wealth taxes.
  • Corporate tax incentives with tax-free dividends for non-domiciled shareholders.
  • Flexibility in residency options, with tax residency achievable via the 183-day or 60-day rule.
  • Attractive for: Entrepreneurs, HNWIs, digital nomads, retirees, and anyone looking to optimize their global tax strategy.

 

Author: Mr. Nasos A. Kyriakides LL.B, DI.M, LL.M, MCI Arb. from NASOS A. KYRIAKIDES & PARTNERS LLC, GRATA International, Cyprus