Cyprus Offers Appealing Non-Domicile Tax Benefits

In recent years, Cyprus has taken steps to package itself as a competitive destination for individuals and companies seeking favorable non-domicile tax residency.

The island in the East of the Mediterranean Sea has passed laws and set up systems for this purpose.

What exactly is a non-domicile tax residency?

This is a legal residency that a person (both natural and artificial) acquires in a country that often is not their original home country for taxation purposes. Usually, the motivation to seek a tax residency in a country that is not your original home is favorable tax rates.

In some cases, that means being offered an opportunity not to pay taxes at all on revenue and returns earned elsewhere in the world.

Before July 2017, the Cyprus tax residency offer was guided by the internationally applied The 183 Days Rule, which states that for one to be considered a resident of a country for taxation purposes, they need to spend at least 183 days in a calendar year there.

In 2017, the parliament in Cyprus ratified The 60 Days Rule. Now you can spend only 60 days in the country during the year, and you qualify to be a tax resident. Of course, you have to meet other requirements, which include:

  • Not being a tax resident of another country.
  • Not spending more than 183 days in a calendar year in another country.
  • Proofing ownership or lease of a home on the island
  • Be engaged in economic activity on the island.

So what are some of the benefits that an entrepreneur or a company stands to get by choosing Cyprus as a tax residency?

The benefits include the following:

  • Exempt from paying tax on dividends and passive income earned from business interests broad
  • Exempt from paying tax on the profit earned from the sale of stocks, bonds, debentures, and other similar assets.
  • A ten year 50% discount on income tax for a salary of over €100,000 when employed outside Cyprus.

It is important to point out tax residency laws and treaties were created to protect individuals and companies with international business interests from double taxation. Nevertheless, they have proven to be a means through which some countries can attract wealth to themselves.

Even from the nominal tax that Cyprus charges, it still stands to generate substantial revenue. It also stands to attract corporate investments. This makes the arrangement a win for both non-domiciled taxpayers and the island country.


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