Benefits of Cyprus Tax Residency for Non-Domiciled Residents

Searching for a tax-friendly residency that works in your favour?

Cyprus offers one of the most attractive non-dom tax regimes in Europe, with low tax rates and generous exemptions for non-domiciled residents.

But gaining non-dom status here and the benefits that go with it can be a complex process, so the Nomad Capitalist team has put together this guide to help you understand the route before you go too far down it.

Whether you’re considering a move or need expert guidance on tax residency across multiple jurisdictions, we can help.

Our team builds holistic offshore plans for each of our clients, allowing them to optimise their wealth and enhance their personal freedom. 

We can help you, too. Just reach out and let us help you ‘go where you’re treated best’.

How to Become a Non-Domiciled Resident in Cyprus

As an expat, if you take up Cyprus tax residency, you will generally qualify as a Cyprus non-domiciled resident. This means that you can remain on Cypriot territory for 17 years. 

There are two ways to become a tax resident in Cyprus: the 183-day rule and the 60-day rule. 

You can become a Cyprus tax resident by spending at least 183 days of the tax year in Cyprus, or if you: 

• Live in Cyprus for at least 60 days during the tax year of assessment
• Maintain a permanent home in Cyprus (either owned or rented)
• Do not reside in any other country for more than 183 days in a tax year
• Are not tax resident in any other country during the tax year
• Do business in Cyprus.

To do business means carrying out any business in Cyprus or being employed or holding an office (such as a director) of a company tax resident in Cyprus. 

One of the most popular ways to become accountable for Cyprus taxation is by registering your own private company that provides your employment contract.

Cyprus Tax Benefits for Non-Dom Residents

Tax residency in Cyprus comes with many benefits.

One of the greatest benefits of tax residency for non-doms is an exemption from taxation on worldwide dividends and passive interest income.

There is no income tax on salaried services rendered outside Cyprus, provided this exceeds 90 days in the same tax year. 

In addition, if you earn income from a permanent establishment outside Cyprus and spend at least 90 days working for that permanent establishment outside Cyprus, then this income is not taxed in Cyprus.

Personal Income in Cyprus is taxed progressively, with a tax-free allowance of €19,500 per year.

Your salary is taxed in Cyprus, but this could be structured so you receive a low salary of €19,500, which will not be taxed, and then receive dividends that are not taxable under the Cyprus non-dom regime.

There is a flat tax rate of 5% on pension income for retirees.

Your pension is free of tax in Cyprus up to €3,420 per tax year, with the excess subject to Cyprus tax at 5%.

Low Corporate Tax Rate

At 12.5%, this is one of the lowest corporate tax rates in the European Union and one of the best worldwide, making Cyprus an even more attractive tax destination.

Extensive Double Taxation Treaties

Cyprus has established treaties with many countries to avoid double taxation. 

So, if you’re a Cypriot tax resident (whether you have a Cypriot domicile of origin or count yourself as non-domiciled ) and receive a dividend from a country that has a treaty with Cyprus, you will enjoy tax advantages such as paying lower withholding taxes in these other countries. 

And if you’re a non-domiciled tax resident of Cyprus, this dividend income is tax-exempt in Cyprus.

Exemptions from Special Contribution for Defence (SDC)

Under the provisions of the income tax law, for non-doms, these tax exemptions relate to dividends, bank deposit interest, and rental income, no matter where the income originates. 

How Do the CFC Rules Apply to Cypriot Tax Residents Under Non-Dom?

The authorities will not know if you have another company, as you do not need to declare this information.

If the foreign company is managed from Cyprus, then that company is a Controlled Foreign Company (CFC). 

To avoid that, you should not work, sign contracts or do anything business-related in the 60 days you are in Cyprus (the 60 days don’t need to be continuous).

On the other hand, if you are a non-Cyprus tax resident who forms a company in Cyprus, you can claim that your business is not a Cyprus tax resident company because it is not managed in Cyprus. That way, you avoid paying Cypriot corporate tax.

A Cyprus company without tax residence in Cyprus may not use the double taxation treaties as income tax exemptions.

It’s generally not necessary to employ a local director for a Cyprus company, but it can be a good idea, depending on the case. 

If you want to make the claim that the company is not managed from Cyprus and avoid paying corporate tax, you shouldn’t recruit a local director.

Benefits of Cyprus Non-Dom Tax Residency: FAQs

Start Your Journey to Lower Taxes

A Cypriot tax residence has many benefits, from reduced tax burdens to a strategic location in the heart of Europe. 

With its attractive non-dom regime, you can keep more of your wealth while enjoying a high standard of living in a safe and business-friendly environment.

We help tax residents all around the world to qualify for tax exemptions. Some of our clients have become completely exempt.

At Nomad Capitalist, we have a worldwide network of lawyers, estate agents, accountants and tax and company formation specialists. 

All that expertise and real-world experience come together when we create your holistic, bespoke action plan. Become a client today.