Introduction of Cyprus domicile and non-domicile persons and relevant tax incentives

Cyprus has introduced the Non-Domicile principle in its tax laws in order to give further incentives to foreign investors and high net worth individuals to physically move and relocate their business to the island. Before the introduction of the Non-Domicile principal, all tax residents of Cyprus, whether domiciled or not, who run their business through a Cyprus company had to suffer a 17% withholding tax on dividends. In addition, Cyprus tax residents are liable for a 30% and 2,25% withholding tax on interest and rental income respectively. After the amendment of the tax legislations, non-domiciled individuals, even if they are tax residents of the Republic, are exempted from any of the above withholding taxes regardless of whether such income is derived from sources within Cyprus or not.

Any person who is physically present in Cyprus for at least 183 days during a calendar year is considered to be a tax resident of the Republic. An individual can be considered as domiciled in Cyprus either:

(a) by domicile of origin (given at birth); or
(b) by domicile of choice (establishing a home with the intention to reside in Cyprus permanently or indefinitely).

The concept of "domiciled in Cyrprus" is based on the Wills and Succession Law Cap.195.

According to the law, non-domiciled is:

  • an individual who has obtained and maintained a domicile of choice outside Cyprus in accordance with the Wills and Succession Law, provided that such an individual has not been a tax resident of Cyprus for a period of 20 consecutive years preceding the cureent tax year; or
  • an individual who has not been a tax resident of Cyprus for a period of 20 consecutive years prior to the introduction of the law

Notwithstanding the above, an individual who has been a tax resident of Cyprus for at least 17 years out of the last 20 years prior to the cureent tax year will be considered to be domiciled in Cyprus and as such will be subject to withholding tax regardless of the domicile of origin.

The new non-dom rules strategically enhance the competitiveness of the Cyprus taxation system and are expected to attract and further encourage high net worth individuals, international investors and corporate executives to relocate to the island.

This newsletter has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this newsletter. Reanda Cyprus Limited would be pleased to advise readers on how to apply the principles set out in this newsletter to their specific circumstances. Reanda Cyprus Limited accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this newsletter