How to become a non-domicile tax resident of Cyprus

HOW TO BECOME A NON- DOMICILE TAX RESIDENT OF CYPRUS

The “Non-Domicile Scheme” was introduced in 2015 and in order to increase its competitiveness, the Cyprus government has amended the criteria applicable for an individual’s tax residency in Cyprus by adding a second test: “The 60-day rule”. This new legislation was published in the official Cyprus Gazette on 28 July 2017, and applicable for the tax year 2017 and beyond.

Before the amendment of the legislation:
“Resident in the Republic” referred to an individual staying in the Republic for a period or periods exceeding in aggregate 183 days in the year of assessment.
“Non-resident or resident outside the Republic” shall be interpreted accordingly.

The “60-day rule”

The Income Tax Law has been amended in such a way that an individual who does not remain in any other jurisdiction for a period exceeding 183 days in aggregate in the same tax year and who is not a tax resident in any other state for the same tax year, shall be considered to be a tax resident of Cyprus, provided that ALL the following conditions are met:

a. Remain in Cyprus for at least 60 days during the tax year.
b. Pursue any business in Cyprus, or work in Cyprus, or be a director in a company which is a tax resident in Cyprus at any time during the tax year, provided that this is not terminated during the year.
c. Maintain a permanent home in Cyprus.

Points for consideration

In order for the new rules of tax residency to apply, the Cyprus Tax Department must be satisfied that:

• the individual does not remain in any single jurisdiction for more than 183 days during a calendar year, and
• does not maintain a tax residency in another jurisdiction under the local legislation of such a jurisdiction, taking into consideration any Double Tax Treaty with Cyprus of said jurisdiction.

The “Non-domicile” concept

A non-domicile Cyprus tax resident is exempt from tax in Cyprus on his worldwide dividend, income and “passive” interest income, from both sources, Cyprus and abroad.

An individual is considered as domiciled in the Republic of Cyprus if:

• An individual has “Domicile of Origin” in the Republic of Cyprus as defined in the Wills and Succession Law.
• “Domicile of Origin” is acquired at birth and as a rule, is the father’s domicile at the time of birth; 
• The individual was a Cyprus tax resident for more than 17 out of the last 20 years prior to the tax year in question.

Therefore, an individual who does not meet any of the above conditions, is considered “Non-Domicile” and can benefit from the exemptions applicable for dividends and “passive” interest income.

Tax incentives for foreign individuals to relocate and become Cyprus tax Residents

Cyprus tax residents are taxed in Cyprus on their worldwide income, irrespective of whether they become Cyprus tax residents either under the “183 days rule” or the “60-day rule”. However, there are several exemptions which make Cyprus an attractive place to relocate and become a Cyprus tax resident.

• 100% exemption on profit from the sale of securities, including shares, bonds, and options.
• Employment income exemption for high paid individuals taking up employment in Cyprus.
• 50% exemption applies for a period of 10 years for individuals who were not Cyprus tax residents before the commencement of their employment in Cyprus, and provided that the annual remuneration exceeds EUR 100,000.
• Employment income exemption for individuals taking up employment outside Cyprus.
• 100% exemption from Cyprus income tax for any income from employment exercised outside Cyprus by a Cyprus tax resident for more than 90 days in a tax year to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus tax resident employer.