Cyprus Tax Residency: How to Become a Tax Resident and Enjoy Tax Benefits as a Non-Domiciled Person

Cyprus Tax Residency: How to Become a Tax Resident and Enjoy Tax Benefits as a Non-Domiciled Person

If you're looking for a tax-efficient country to become a resident, Cyprus is one of the most attractive destinations. With its favourable tax regime, Cyprus offers numerous benefits for individuals, including non-domiciled persons.

In this article, we will describe how to become a Cyprus tax resident and non-domiciled status, which can save you a significant amount of tax.

Tax Imposition

A Cyprus tax resident is taxed on income from both inside and outside Cyprus. On the other hand, non-tax residents are only taxed on income arising within Cyprus.

Tax Residency

Cyprus tax system is based on the residency principle. To become a tax resident, you need to meet either the 183-day rule or the 60-day rule.

The 183-day rule states that if an individual spends more than 183 days in Cyprus in a tax year (1st of January to 31st of December), he is considered a Cyprus tax resident. However, if the individual stays in Cyprus for less than 183 days, he is not a Cyprus tax resident for that tax year.

The 60-day rule, introduced in 2017, allows an individual to become a Cyprus tax resident if he spends less than 183 days in Cyprus, provided he meets the following conditions within the same tax year:

  • Does not spend more than 183 days in any other country
  • Is not a tax resident in any other country
  • Spends at least 60 days in Cyprus
  • Has a permanent home in Cyprus 
  • Engages in business activities, is employed in Cyprus or is a director in a company that is tax resident in Cyprus
  • If business, employment or holding of an office is terminated during the year, the individual will not be treated as a Cyprus tax resident for that year.

Definition of Non-Domiciled Persons

Domicile of origin is the domicile received by an individual at birth, while domicile of choice is the domicile acquired by an individual by establishing physical presence in a particular place with the intention to make it the place of permanent residence.

Individuals who have been tax residents in Cyprus for at least 17 out of the last 20 years before the tax year will be deemed domiciled in Cyprus for the purposes of the SDC Law.

Tax Benefits Of Non-Domiciled Persons

As a Cypriot tax resident, you are liable to Special Defence Contribution (SDC) instead of income tax for your bank interest and dividend income. However, if you are a non-Cyprus domicile, you are exempt from SDC, except for minimal contributions to the General Healthcare System (GeSY).

Other Tax benefits for individuals:

Exemption from Cyprus Taxation on Profit from Sale of Qualifying Titles

Profit from the sale of shares and other qualifying titles is specifically exempt from Cyprus taxation, provided that the underlying assets do not include immovable property located in Cyprus. This exemption is a significant advantage for investors looking to avoid high taxes on their capital gains.

Tax Exemption for the First €19,500 of Taxable Income

The first €19,500 of taxable income is tax-exempt for Cypriot tax residents. Any taxable personal income exceeding this amount is taxed at progressive rates ranging from 20% to 35% for incomes over €60,000. This tax exemption is particularly beneficial for individuals with low to medium incomes.

Flat Rate Tax on Pension Received in Respect of Past Employment Abroad

Pension received in respect of past employment abroad is taxed in Cyprus at a flat rate of 5% for amounts exceeding €3,420 per year. This flat rate tax is an advantage for retirees who receive pensions from their foreign employers.

Exemption from Inheritance Tax, Wealth Tax, and Gift Taxation

One of the most significant advantages of being a Cypriot tax resident is the exemption from inheritance tax, wealth tax, and gift taxation. This exemption is an advantage for individuals who want to transfer their assets to their beneficiaries without incurring high taxes.

Are you tired of paying high taxes on your income and assets in your home country? Non-domiciled tax residency status in Cyprus may be the solution you are looking for. Contact us for more information

*This guide contains information for general guidance and does not substitute professional advice which must be sought before taking any actions.