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Finance • Legal Tax Reduction

How to Pay Low Taxes in Cyprus as a Non-Dom

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With its favourable tax regime and extremely low presence requirement, Cyprus is an excellent choice for anyone who wants to spend at least part of the year on a friendly, sun-drenched Mediterranean island.

This article explains Cyprus’s Non-Dom status, how you can get it, and the lifestyle and taxation benefits. 

It will help you decide if Cyprus and its Non-dom program is broadly of interest; it’s not professional tax advice. If you need a detailed tax planning strategy based on your individual needs, you can find out more here

Nomad Capitalist is a turnkey solution for offshore tax planning, dual citizenship, asset protection, and global diversification. 

Why live in Cyprus? 

The Republic of Cyprus is an island situated in the eastern Mediterranean Sea. Its strategic position as a gateway to the Middle East may account for its complex history and modern-day geopolitical divide. Once a British colony, Cyprus gained independence in the 1960s. 

Not officially part of Greece, but culturally Greek, the southern 60% of the island is an independent EU member state. However, the northern part (36% of the territory) is under Turkish control, and two small areas are still under British rule for military reasons. The main languages spoken are Greek, Turkish and English; the latter is widely spoken and used for business. 

A relatively large island of 9.251 square kilometers, Cyprus has something for everyone. Its enduring popularity as a tourist destination, with 3,201,080 people visiting in 2022, is a testament to its year-round warm weather, idyllic coastline and beaches, picturesque villages, and ancient ruins. 

If that isn’t enough, its Mediterranean cuisine and the Troodos mountain range are notable reasons to go there. Aphrodite’s Rock, the ancient ‘birthplace’ of Venus, the goddess of love, is its best-known visitor attraction. 

The capital, Nicosia, is divided into Greek and Turkish parts of the city; you can move freely between them. As you would expect, there is diverse culture, art, history, and experiences to enjoy. The islands boast two international airports and two deep-sea ports.

Cyprus in Numbers:

  • Population 1,260,138
  • 78% of the population are Greek Orthodox Christians.
  • Around 50,000 British nationals live in Cyprus. 
  • In 2022, GDP was US$28.44 billion for the country.
  • More than 300 days of sunshine a year. 

The Economy of Cyprus

Cyprus is a modern, dynamic economy that has transformed from an agricultural base to one dominated by service-based industries. Underpinned by tourism, the services sector employs 70% of the total labour force, producing 80% of the national GDP. Traditional exports of potatoes and citrus crops contribute 2.1% of GDP and employ 8.5% of the workforce.

The recent success of its stable and fast-emerging economy has led to Cypriots being among the most prosperous in the Mediterranean region. 

Recently, Cyprus has been recognised as a business services hub supporting tourism, shipping, and finance and a centre for investment into Russia and Eastern Europe. It has also benefited from the relatively recent discovery of offshore gas near its southern coast. 

With solid fundamentals, including a resilient labour market and decreasing public debt, forecasts suggest Cyprus will maintain a healthy budget surplus into 2024. That stability has led to a buoyant property market on the island. 

Demand for housing is proving to be a spur for property investors who can avail of reduced income tax rates, capital gains, and inheritance tax exemptions. 

The Tax System In Cyprus

Cyprus has a residency-based tax system of taxation, with physical presence exceeding 183 days in a tax year, constituting tax residency for individuals. At 12.5%, Cyprus’s corporate tax rate for resident companies is one of the lowest in Europe. 

Tax residents in Cyprus are subject to income tax under the following brackets.  

  • €19,501 to €28,000 – 20% 
  • €28,001 to €36,300 – 25%
  • €36,301 to €60,000 – 30% 
  • Over €60,000 – 35%

Tax residents are obliged to pay taxes on worldwide income, regardless of resident status. However, as we will explain, its non-don program exempts dividends and interest income for non-doms, whether Cyprus-sourced or foreign-sourced.

If an individual is physically present in Cyprus for more than 183 days in a tax year, they will be considered a tax resident of Cyprus in that tax year. 

An individual who does not stay in any other country for more than 183 days in the same tax year and is not a tax resident in another country for the same year is deemed a Cyprus tax resident if they stay in Cyprus for at least 60 days in the tax year. 

Special Defence Contribution (SDC) 

Under the SDC law, dividends and interest income earned by individuals who are tax residents and domiciled in Cyprus are subject to tax at the rate of 17% and 30%, respectively, regardless of whether the source of the income is from Cyprus or abroad. Rental income is also taxed at 3% on 75% of the gross amount.

However, an individual who is a tax resident of Cyprus (either under the 183 days rule or the 60 days rule) but is non-domiciled in Cyprus is exempt from the Special Defence Contribution. 

Therefore, non-doms’ dividends, interest, and rental income are free from SDC tax. 

If you were a non-tax resident in Cyprus before employment, you could still receive concessions, such as: 

  • 20% exemption on tax on your income or €8,550 for five years. 
  • 50% exemption for earnings above €100,000 for ten years from the start of employment. 
  • 5% tax exemption on overseas pensions if the amount exceeds €3420. 

Pay Low Taxes in Cyprus as a Non-Dom

Before we detail the specifics of Cyprus’s non-dom program, let’s consider what criteria you must meet to get it. To succeed in getting non-domicile status, you must prove that either you or your father was born in another country and that you plan to return to that country eventually. 

To be eligible, you must be a tax resident for at least 60 days during a tax year, carry out business activities, or be employed in a Cyprus tax resident company and have a permanent residence by renting or owning a home.

Benefits of Non-dom Status in Cyprus

As a non-dom in Cyprus, you are a tax resident but not permanently domiciled. It has nothing to do with citizenship and is purely tax-related. It mainly benefits people who revolve most of their income from capital gains or dividends.  

Cyprus has one of the friendliest Non-dom tax programs, even more than Malta and Ireland. Cyprus’s non-dom tax status lasts for a maximum of 17 years. People with this status are fully exempt from paying dividends and interest, regardless of whether they are foreign-sourced or not. 

While Ireland and Malta use the remittance basis of taxation for non-doms and foreign capital gains are fully exempt, Cyprus takes a different approach. Dividends and interest income are tax-free for non-doms, whether Cyprus-sourced or foreign-sourced. Other than those arising from the sale of immovable property in Cyprus, capital gains are also tax-exempt there. 

This favourable tax regime couples with an extremely low presence requirement. It required only 60 days to obtain and maintain tax residence for tax purposes, making it the most favourable for digital nomads and permanent travelers who want to utilise the trifecta approach

Besides its favourable non-dom tax regime, there is also a 100% exemption on salaries received for work done outside Cyprus for more than 90 days in a tax year to a non-Cyprus employer. 

There is also no inheritance, gift tax, or tax on properties outside Cyprus and no capital gains from the sale of assets, except property in Cyprus. 

Since the question of domicile is based on your subjective intent, we recommend you review your domicile position with a tax adviser every few years and note the findings on your review file. 

Tax benefits of Non-dom Status in Cyprus, in summary:

  • Dividends and interest income are tax-free.
  • There are no immovable property taxes.
  • No inheritance and gift taxes.
  • You will receive a 100% relief on salaries paid for services outside Cyprus to a non-resident employer for over 90 days in a fiscal year.
  • Unlike Ireland and Malta, there is no remittance basis of taxation. 

Conclusion

If you are a high-net-worth entrepreneur or investor, there are clear tax advantages to living in Cyprus as a non-dom. Tax benefits are one of many reasons to consider living there, however. By having a permanent base there, for some part of the year, you can enjoy a beneficial lifestyle, new travel opportunities, and work towards citizenship if you wish.

With the ideal combination of tax planning, residence, and asset protection strategies, it is possible to be taxed practically zero with Cyprus’s Non-dom program. Here at Nomad Capitalist, it’s what we call going where you’re treated best

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