Cyprus Non-Dom Status

In 2015, Cyprus introduced the new Non-Dom status, which affects physical persons that consider to use Cyprus as their tax seat and gain from the favourable tax regime both in a corporate and personal level.

The main point of the reform has to do with a change in a tax known as Special Defence Contribution tax (SDC).

The change in question is effective as from the 16th of July 2015.

SDC Tax Rates Prior to the Amendment

Prior to the amendment a tax resident non-dom individual would pay the following taxes:

  • Dividend income at 17%
  • Interest income at 30%
  • Rental income at 3% (on 75% of the income i.e. effective rate of 2.25%)

The SDC law also included provisions for the deemed distribution of profits of Cypriot tax resident companies where the shareholders (beneficiaries) of such companies are Cyprus tax resident individuals.

What change is it introduced by the amendment of the SDC law?

Following the amendment to the SDC law, Cyprus resident non-dom individuals will no longer be subject to SDC taxes.

However an individual who is a tax resident of Cyprus for a period of at least 17 out of the last 20 years prior to the tax year of assessment cannot benefit from the above exception.

Effectively this means that if a non tax  resident non-dom individual becomes tax resident in Cyprus this year he will not be liable to pay SDC tax for the next 17 years.

How is the domiciled status determined?

The SDC law defines the term domicile with reference to the Will and Succession Law of Cyprus.

An individual is considered to have a domicile in Cyprus either:

  • by domicile-of-origin; or
  • by domicile-of-choice

The Wills and Succession Law provides that:

  • When a child is born, while the child’s father is alive, the child’s domicile is the same of that of the father at the moment of birth.
  • When a child is born out of wedlock, or after the death of the father, the child’s domicile is the same of that of the mother at the moment of birth.
  • A person can obtain domicile-of-choice by setting up their home anywhere within Cyprus with the intention to reside there permanently or indefinitely.
  • The domicile-of-origin prevails and is maintained until a domicile-of-choice is obtained.
  • The domicile-of-choice is maintained until a new domicile-of-choice is obtained or the domicile-of-origin is reclaimed.