Non-Domicile Cyprus – 9 Key Benefits
Cyprus has become a popular destination for individuals seeking to optimise their tax obligations, particularly through the acquisition of Non-Domicile (Non-Dom) status. What exactly means Non-Domicile Cyprus?
This status provides significant tax advantages and is an attractive option for expatriates and foreign investors. Foreigners benefit from a favourable tax regime that exempts them from the Special Defence Contribution (SDC) tax on certain types of passive income for up to 17 years when relocating personal tax residency to Cyprus.
In this article, you’ll receive a detailed overview of the steps necessary to obtain Non-Dom status in Cyprus, as well as the associated benefits.
Understanding Non-Domicile Status in Cyprus
Non-Dom status is a tax designation available to individuals who establish their tax residency in Cyprus but are not domiciled in the country. The key benefit of this status is the exemption from the Special Defence Contribution (SDC) tax, which is typically levied on passive income such as dividends, interest, and rental income.
Under the Non-Dom regime, these forms of income are largely exempt from Cypriot taxation, making it a highly advantageous status for many expatriates and international investors.
Steps to Confirm Your Non-Domicile Cyprus
To qualify for Non-Dom status, an individual must first become a tax resident of Cyprus. A person becomes a tax resident if they spend more than 183 days in Cyprus within a tax year or meet the criteria of the “60-day rule“.
The 60-day rule stipulates that an individual can be a tax resident if they:
- Reside in Cyprus for at least 60 days within the tax year.
- Do not reside in any other single country for more than 183 days.
- Is not considered a tax resident in another country.
- Have a business or employment in Cyprus
- Maintain a permanent residence in Cyprus.
Once tax residency is established, the individual can apply for Non-Dom status. This involves submitting an application to the Cypriot Tax Authorities, along with the required documentation, which typically includes proof of residence, employment contracts, and any other relevant personal and financial information.
The processing time for the application is approximately three weeks.
Key Benefits of Non-Dom Status
The benefits of obtaining Non-Dom status in Cyprus extend beyond mere tax exemptions.
Here are some of the key advantages specifically related to the Non-Dom status itself:
1. Tax Exemptions on Passive Income
One of the primary advantages of Non-Dom status is the exemption from the Special Defence Contribution (SDC) tax on various forms of passive income:
- Dividend Income: Non-Doms are exempt from the 17% Special Defence Contribution (SDC) tax on dividends, which allows individuals to retain more of their investment returns. Instead, they contribute only 2.65% towards the General Health System (GeSY), capped at 4,770 EUR.
- Interest Income: Interest earned by Non-Doms is exempt from the 30% SDC tax. This is particularly beneficial for those with significant interest-bearing investments or savings.
- Rental Income: While rental income is subject to normal income tax rates, Non-Doms benefit from an 80% taxable basis and are exempt from the SDC on this income, significantly reducing the tax burden on property investments.
2. Extended Duration of Benefits
The Non-Dom status in Cyprus is granted for a period of up to 17 years. This extended duration provides long-term financial stability and predictability, allowing individuals to plan their finances with confidence over nearly two decades.
3. No Wealth and Inheritance Taxes
Cyprus does not impose wealth or inheritance taxes, which is a significant advantage for Non-Doms concerned about estate planning and the transfer of wealth.
This ensures that accumulated wealth can be passed onto future generations without incurring additional tax liabilities, facilitating efficient intergenerational wealth transfer.
4. Favourable Personal Tax Rates
In addition to the specific exemptions on passive income, Non-Doms benefit from Cyprus’s overall favourable tax rates. The personal income tax rates are progressive, with a maximum rate of 35% for income exceeding EUR 60,000.
However, various deductions and allowances can further reduce taxable income, making the effective tax rate lower for many individuals.
5. Business and Employment Flexibility
Cyprus offers a conducive environment for business and employment. Non-Doms who establish businesses in Cyprus benefit from the low corporate tax rate of 12.5%, one of the lowest in the EU. Additionally, the island’s strategic location, robust legal system, and business-friendly policies provide an excellent foundation for international operations and entrepreneurship.
6. Access to EU Markets
As an EU member state, Cyprus provides Non-Doms with direct access to the European single market. This access is particularly beneficial for individuals engaged in trade, investment, and business activities across Europe, offering seamless operations and fewer barriers within the EU.
7. Financial Privacy
Cyprus has robust laws protecting financial privacy, which is an attractive feature for high-net-worth individuals. The country adheres to international standards on transparency and anti-money laundering but also respects the privacy of its residents, ensuring a balanced approach.
8. Lifestyle and Cultural Benefits
While the primary focus of Non-Dom status is on tax benefits, the high quality of life in Cyprus is an added advantage. The country offers a pleasant climate, rich cultural heritage, excellent healthcare, and a safe environment. These lifestyle benefits complement the financial advantages, making Cyprus a desirable place to reside and enjoy a comfortable life.
9. Practical Considerations
When considering a move to Cyprus to obtain Non-Dom status, it is essential to engage with a qualified tax advisor who can provide guidance on the specific requirements and ensure compliance with local tax laws.
Practical Tips for Relocating to Cyprus as a Non-Dom
Relocating to Cyprus to secure Non-Dom status involves more than just applying for tax residency. To enjoy the full benefits of this status, you’ll need to settle key aspects of your move, such as finding accommodation, obtaining the Yellow Slip (residency permit), and opening a local bank account.
Here are practical tips to make the transition smooth and stress-free.
1. Finding Accommodation in Cyprus
Securing a permanent residence is an important requirement for Non-Dom status, as it demonstrates your intention to establish tax residency in Cyprus.
Tips for finding a home:
- Start early: Popular cities like Limassol, Nicosia, and Paphos often have high demand for quality rentals. Start your search as early as possible to find suitable housing.
- Consider location: Choose a location that aligns with your lifestyle and business needs. Limassol is ideal for entrepreneurs due to its vibrant business hub, while Paphos offers a quieter, more relaxed lifestyle.
- Work with local agents: Real estate agents can help you navigate the housing market and secure long-term rental contracts, which are often required for residency applications.
Your lease agreement will be part of the documentation you need to apply for the Yellow Slip and Non-Dom status, so make sure it is signed and legally compliant.
2. Applying for the Yellow Slip (Residency Permit)
The Yellow Slip is essential for EU citizens moving to Cyprus, as it establishes legal residency in the country. Obtaining this permit is also a key step toward securing Non-Dom status.
Steps to apply for the Yellow Slip:
- Gather the required documents:
- Passport (original and copy)
- Proof of income (employment contract or proof of self-employment)
- Rental agreement or property ownership documents
- Health insurance coverage (private or public)
- Visit the Immigration Department: Submit your application in person at the Civil Registry and Migration Department. Make an appointment in advance to avoid long waiting times.
- Pay the application fee: The fee is approximately €20.
The Yellow Slip not only allows you to legally reside in Cyprus but also serves as proof of residency when applying for Non-Dom status or opening a bank account.
3. Opening a Bank Account in Cyprus
Having a local bank account is essential for managing your finances, paying taxes, and conducting business in Cyprus. As a Non-Dom, opening a bank account in Cyprus is straightforward but requires specific documentation.
Documents typically required:
- Passport or ID card
- Yellow Slip (proof of residency)
- Proof of address (utility bill or rental agreement)
- Tax Identification Number (TIN)
Tips for choosing a bank:
- Opt for banks that offer online banking services in English, such as Hellenic Bank, Bank of Cyprus, Revolut or Eurobank.
- Discuss your specific needs as a Non-Dom with your bank to ensure they can accommodate international transfers, investment accounts, or other services relevant to your financial situation.
A Cypriot bank account is particularly useful for receiving income, such as dividends or interest, which are exempt from the Special Defence Contribution (SDC) tax under the Non-Dom regime.
4. How Non-Dom Status Simplifies the Relocation Process
The Non-Dom status complements your relocation by providing financial advantages that make settling in Cyprus even more appealing:
- Cost savings on rental income and interest: If you invest in property or savings while living in Cyprus, your rental and interest income are largely tax-exempt.
- Ease of managing finances: With no SDC tax on dividends, managing business income and savings through a local bank account is significantly more efficient.
- Long-term planning: The 17-year duration of Non-Dom benefits ensures financial predictability, giving you peace of mind while building your new life in Cyprus.
Conclusion
Obtaining Non-Dom status in Cyprus offers a range of significant benefits, particularly in terms of tax efficiency and wealth management.
The exemption from the Special Defence Contribution (SDC) tax on dividends, interest, and rental income provides substantial savings, making Cyprus an attractive destination for expatriates and international investors.
Additionally, the high quality of life, strategic location, and favourable tax rates further enhance the appeal of establishing tax residency in Cyprus.
By following the detailed steps outlined in this article, individuals can effectively secure Non-Dom status and enjoy the numerous advantages it brings. Engaging with a professional tax advisor is recommended to ensure a smooth and compliant transition to this advantageous tax regime.
Navigating the process of obtaining Non-Dom status in Cyprus can be complex, but RebaseCyprus makes it simple. Our team provides expert guidance at every step, from establishing your tax residency to compiling and submitting the required documentation.
We handle the details, including applying for your Yellow Slip, ensuring your residency status is approved, and assisting with opening a bank account in Cyprus.
With RebaseCyprus, you can seamlessly transition to Cyprus, secure Non-Dom status, and start enjoying the significant tax benefits and lifestyle advantages the country offers. Contact us today to get started!
