How to Pay Low Taxes in Cyprus as a Non-Dom: The Ultimate Guide for Maximizing Your Tax Benefits

Cyprus is a top choice for individuals seeking to optimize their tax liabilities, thanks to its attractive Non-Domiciled (Non-Dom) tax regime. Designed to attract foreign investors, entrepreneurs, and high-net-worth individuals, the Non-Dom status offers significant tax advantages, making Cyprus one of the most tax-efficient jurisdictions in Europe. Whether you’re looking to relocate to Cyprus or invest in the country, understanding how to leverage the Non-Dom status can help you minimize your tax obligations and maximize your financial benefits. In this guide, we’ll explore everything you need to know about paying low taxes in Cyprus as a Non-Dom, including eligibility criteria, tax benefits, and the steps to apply for Non-Dom status.

What is Non-Dom Status in Cyprus?

The Non-Domiciled (Non-Dom) tax status in Cyprus is a special regime designed to attract foreign nationals to the island by offering them significant tax advantages. Under this regime, individuals who qualify as Non-Doms in Cyprus are exempt from certain taxes that would otherwise apply to residents. The Non-Dom regime is particularly beneficial for individuals with significant foreign income, as it allows them to minimize their tax liabilities in a legal and efficient manner.

Key Features of the Non-Dom Regime:

• Exemption from Special Defence Contribution (SDC) Tax: Non-Doms are exempt from paying the SDC tax on dividends, interest, and rental income earned both in Cyprus and abroad.
• No Wealth, Inheritance, or Gift Taxes: Cyprus does not impose wealth, inheritance, or gift taxes, making it an attractive destination for wealth preservation and estate planning.
• Favorable Taxation of Foreign Income: Non-Doms can benefit from the absence of taxation on most foreign income, including dividends and interest.

Who is Eligible for Non-Dom Status in Cyprus?

To qualify for Non-Dom status in Cyprus, an individual must meet specific criteria related to their residency and domicile status. Here’s what you need to know:

1. Residency Requirements

To be considered a resident of Cyprus for tax purposes, an individual must spend at least 183 days in Cyprus within a calendar year. However, Cyprus also offers the “60-day rule,” which allows individuals to be considered tax residents if they meet the following conditions:

• Spend at least 60 days in Cyprus within a calendar year.
• Do not reside in any other single country for more than 183 days in the same calendar year.
• Maintain a permanent residence in Cyprus, either owned or rented.
• Conduct business or work in Cyprus, or hold an office in a company that is tax-resident in Cyprus.

2. Non-Domiciled Status

To qualify as a Non-Dom in Cyprus, an individual must not be domiciled in Cyprus. Domicile refers to the country that a person treats as their permanent home. There are two types of domicile:

• Domicile of Origin: This is usually acquired at birth and is based on the domicile of the father.
• Domicile of Choice: This is acquired by establishing a permanent home in a different country with the intention of remaining there indefinitely.

Individuals who have been residents of Cyprus for at least 17 out of the last 20 years are considered domiciled in Cyprus and are therefore not eligible for the Non-Dom regime. Conversely, foreign nationals who move to Cyprus and have not been domiciled in the country for the specified period are eligible for Non-Dom status.

Tax Benefits of Non-Dom Status in Cyprus

The Non-Dom regime in Cyprus offers several tax benefits that can significantly reduce your overall tax burden. Here are the key tax advantages of obtaining Non-Dom status in Cyprus:

1. Exemption from Special Defence Contribution (SDC) Tax

One of the most significant benefits of the Non-Dom regime is the exemption from the Special Defence Contribution (SDC) tax. The SDC tax is typically imposed on dividends, interest, and rental income earned by Cyprus tax residents. However, individuals with Non-Dom status are exempt from paying this tax, resulting in substantial tax savings.

Key Points:

• Dividends: Non-Doms do not pay SDC tax on dividends received from both Cyprus and foreign companies.
• Interest: Non-Doms are exempt from SDC tax on interest income, whether earned in Cyprus or abroad.
• Rental Income: Non-Doms do not pay SDC tax on rental income generated from properties in Cyprus or overseas.

2. No Wealth, Inheritance, or Gift Taxes

Cyprus does not impose wealth, inheritance, or gift taxes, making it an attractive jurisdiction for wealth preservation and estate planning. Non-Doms can transfer assets and wealth to their heirs without the burden of additional taxes, ensuring that more of their wealth is preserved for future generations.

3. Favorable Taxation of Foreign Income

The Non-Dom regime in Cyprus provides significant benefits when it comes to the taxation of foreign income. Most foreign income, including dividends and interest, is exempt from taxation in Cyprus for Non-Doms. This means that individuals with substantial investments or income streams from abroad can benefit from a highly tax-efficient structure.

4. Low Corporate Tax Rate

Cyprus offers a low corporate tax rate of 12.5%, which applies to worldwide income for companies tax-resident in Cyprus. Non-Doms who establish a company in Cyprus can benefit from this favorable tax rate, making it an ideal location for business operations and investment activities.

5. Access to Double Taxation Treaties

Cyprus has an extensive network of double taxation treaties with over 60 countries. These treaties help to prevent double taxation on the same income and provide clarity on the tax treatment of income generated in different jurisdictions. Non-Doms can take advantage of these treaties to optimize their tax liabilities.

How to Apply for Non-Dom Status in Cyprus

Applying for Non-Dom status in Cyprus involves several steps, including establishing tax residency and proving your domicile status. Here’s a step-by-step guide to obtaining Non-Dom status in Cyprus:

1. Establish Tax Residency

To apply for Non-Dom status, you must first establish tax residency in Cyprus. This can be done by meeting the 183-day rule or the 60-day rule, as outlined earlier. You’ll need to keep detailed records of your time spent in Cyprus and ensure that you meet all the requirements for tax residency.

2. Register with the Tax Authorities

Once you have established tax residency, you’ll need to register with the Cyprus Tax Department. This involves obtaining a Tax Identification Number (TIN) and filing the necessary tax returns. Registration with the tax authorities is a crucial step in formalizing your Non-Dom status.

3. Prove Your Domicile Status

To qualify for Non-Dom status, you must prove that you are not domiciled in Cyprus. This typically involves providing documentation that shows your domicile of origin or choice is outside Cyprus. If you have recently relocated to Cyprus, you may need to provide evidence of your previous domicile, such as proof of residency or tax returns from your previous country of domicile.

4. Apply for Non-Dom Status

After establishing tax residency and proving your domicile status, you can formally apply for Non-Dom status with the Cyprus Tax Department. The application process may involve submitting various documents, including proof of residency, tax returns, and evidence of your domicile status. It’s advisable to work with a tax advisor or legal professional to ensure that your application is complete and accurate.

5. Obtain Confirmation of Non-Dom Status

Once your application is approved, you’ll receive confirmation of your Non-Dom status from the Cyprus Tax Department. This confirmation will outline the tax benefits you are entitled to as a Non-Dom and provide guidance on how to maintain your status.

Maintaining Non-Dom Status in Cyprus

After obtaining Non-Dom status, it’s essential to maintain your status by adhering to the relevant residency and tax requirements. Here are some key considerations for maintaining Non-Dom status in Cyprus:

1. Continue Meeting Residency Requirements

To maintain your Non-Dom status, you must continue to meet the residency requirements in Cyprus. This means spending at least 183 days (or 60 days under the 60-day rule) in Cyprus each calendar year. It’s important to keep detailed records of your time spent in Cyprus and ensure that you do not inadvertently become tax resident in another country.

2. File Annual Tax Returns

As a tax resident of Cyprus, you’ll need to file annual tax returns with the Cyprus Tax Department, even if you have little or no taxable income in Cyprus. Filing your tax returns on time is crucial to maintaining your Non-Dom status and avoiding penalties.

3. Monitor Changes in Tax Laws

Tax laws and regulations can change over time, and it’s essential to stay informed about any changes that may affect your Non-Dom status. Working with a tax advisor can help you navigate any changes in the law and ensure that you continue to benefit from the Non-Dom regime.

How Cyprus Company Set Up Can Assist You

Navigating the process of obtaining and maintaining Non-Dom status in Cyprus can be complex, but Cyprus Company Set Up is here to help. Our team of experts provides comprehensive services to ensure that you maximize the tax benefits of the Non-Dom regime. Here’s how we can assist you:

1. Residency and Domicile Assessment

We’ll assess your residency and domicile status to determine your eligibility for the Non-Dom regime. Our team will guide you through the process of establishing tax residency in Cyprus and provide the necessary documentation to prove your domicile status.

2. Tax Registration and Compliance

We’ll handle all aspects of your tax registration in Cyprus, including obtaining your Tax Identification Number (TIN) and registering with the Cyprus Tax Department. We’ll also assist you with filing your annual tax returns and ensuring that you remain compliant with all tax regulations.

3. Non-Dom Status Application

Our team will assist you in preparing and submitting your application for Non-Dom status. We’ll ensure that your application is complete and accurate, increasing your chances of approval.

4. Ongoing Support and Advice

We provide ongoing support to help you maintain your Non-Dom status and stay informed about any changes in tax laws that may affect you. Our experts are always available to answer your questions and provide advice on optimizing your tax benefits.