Non-Domicile Tax Resident principle

Cyprus taxes have always been very low. For instance, the corporate tax rate is only 12.5%, and under certain conditions, it can be reduced to as low as 2.5%. There are no taxes on property, inheritance, or wealth, making Cyprus particularly attractive to investors.

However, the Cypriot government has gone even further in its efforts to attract more affluent foreigners. In 2015, a radical "non-domiciled tax residency" program was introduced, which significantly reduces the tax burden for individuals. Since then, the program has proven to be effective and popular. Importantly, the government has no plans to make changes or worsen the conditions of the program.

Before this program was introduced, any tax resident of Cyprus was required to pay a so-called "special contribution" on income earned both in Cyprus and abroad. This contribution included a tax on dividends (17%), interest income (17%), and rental income (2.25%).

Who can be considered as Cyprus tax resident?

Tax residency in Cyprus is determined by the number of days spent on the island during the calendar year. There are two main rules for recognizing tax residency:

1. The 183-day rule: A person who spends 183 days or more in Cyprus in a year is automatically recognized as a tax resident. No additional conditions are required for this rule.
2. The 60-day rule: A person who has spent 60 days or more in Cyprus within a year can also be recognized as a tax resident if certain conditions are met:
   • The person is not a tax resident of another country.
   • They have a residence in Cyprus (owned or rented).
   • The person conducts business in Cyprus, works, or holds a director's position in a company registered in Cyprus.

In 2015, the status of "non-domiciled tax resident" was introduced. This status exempts a Cypriot tax resident from paying taxes on dividends, interest, and rental income.

Who qualifies for the "non-domiciled tax resident" status?

A foreigner obtains the "non-domiciled tax resident" status for the first 17 years of their tax residency in Cyprus.

This makes Cyprus extremely attractive for international businesspeople and high-net-worth individuals.