Cyprus has introduced the concept of Non-Domiciled individuals for tax purposes. The primary objective of the Non-Domicile concept is to set Cyprus as the ultimate choice of destination for both EU and non-EU persons wishing to move their personal tax residency in Cyprus. 

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What is the Non-Domicile concept?

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Foreign individuals who wish to move their personal tax residency in Cyprus, will be considered as non-domiciled in Cyprus for a maximum of 17 years. For tax purposes, non-domicile persons who become Cyprus tax residents will now be completely exempt from Special Defence Contribution tax ("SDC") on dividends and interest.

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Cyprus tax residency:

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An individual is considered as a Cyprus tax resident if he/ she spent more than 183 days in Cyprus in a calendar year. Cyprus tax residents are taxed on their worldwide income with credit given on foreign tax suffered against the Cyprus tax resulting from the same income.

 

Definition of Non-Domiciled persons:

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In accordance with the provisions of Cyprus Laws, there are two kinds of domicile:

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• domicile of origin - the domicile receive at birth

• domicile of choice - the domicile acquired by establishing physical presence in a particular place and by demonstrating sufficient intention to make it the place of permanent residence

 

Irrespective of the domicile of origin or choice, individuals who have been tax residents in Cyprus for at least 17 out of the last 20 years prior to the tax year in question, will be deemed to be domiciled in Cyprus for the purposes of the SDC law.

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Persons who have their domicileof origin in Cyprus, they will be nevertheless be considered as non-domicile in the following cases:

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• If they have obtained and maintained a domiciled of choice outside Cyprus, provided that they were not tax residents in Cyprus for a continuous period of at least 20 consecutive years prior to the tax year in question, or

• If they 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

 

The following tax advantages apply to individuals:

• 50% of salaried income from first employment in Cyprus in the first ten years if annual remuneration exceeds €100,000;

• Alternatively, 20% of salaried income from first employment in Cyprus in the first three years with a maximum deduction of €8,550;

• No tax on profits of a permanent establishment abroad and on salary earned abroad (90-day rule), under certain conditions;

• No tax on profits gained from the sale of securities such as shares, bonds, debentures etc.;

• Lump sums received in the form of retirement gratuity, compensation for death or injuries, provident fund, pension fund or other approved funds are exempt from tax;

• No inheritance tax.

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