Non-Dom Regime for Individuals: Cyprus

Many who are considering favorable tax regimes for the purposes of living in the country and doing business have probably already heard about the benefits of the Cyprus Non-Dom regime. However, few people know what specific benefits this regime provides, since in Cyprus, in addition to the benefits under the Non-Dom, there are enough other general benefits (for example, capital gains tax benefits, etc.).

In this article, we will look at the tax benefits under the Non-Dom regime and figure out who can apply these benefits. 

Taxation 

Cyprus tax residents are payers of personal income tax and The Special Defence Contribution Law (SDC). Individuals applying  the Non-Dom regime are exempt from paying SDC. 
Thus, the following types of income are exempt from SDC: 

• dividends (both from a foreign source and from a source in Cyprus)
• interest received on loans and other similar debt instruments
• Royalties (passive income)
• income from the lease of real estate

Individuals who do not have Non-Dom status are not exempt from paying SDC and, for example, for them, the tax rate on dividends is 17%, interest – from 3% to 30%, royalties – 10%. 

Examples of income that are not subject to taxation under the SDC and, as a result, do not fall under the Non-Dom regime (i.e., taxation occurs in the general manner): 

• capital gains – subject to capital gains tax. Basically, in this case, there is an exemption, but when selling real estate in Cyprus or a share in a company that owns real estate in Cyprus, a tax rate of 20% applies. 
• salaries both from a foreign source and from a source in Cyprus – are subject to personal income tax at progressive rates. 

Grounds for the application of the regime

An individual must meet all of the following criteria:

1. Obtaining the status of a tax resident on the basis of 60 or 183 days of stay in the country. 
2. The individual has not resided in Cyprus for 17 years out of the last 20 years and has not had a Cypriot domicile by birth (permanent connection with Cyprus).
    

Author: Yaroslavna Zadesenskaya

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