Cyprus is an attractive option for individuals who are considering a change of their tax residency.
This island offers; a warm climate, good infrastructure, convenient geographic location, membership of the EU, tax advantages for companies and incentives for individuals through the Cyprus non-domicile regime.
Main Benefits of Legislation Passed in 2015
A change in the tax legislation took effect on the on 16 July 2015
Among the approved changes in Tax Legislation, individuals qualifying under the Non-Domicile tax regime are exempt from the ‘Special Defence Tax’ (SDC).
SDC taxation is a taxation levied on individuals when receiving certain sources of income. Through the SDC exemptions granted, Individuals qualifying under the Non-domicile Tax regime are now exempt from taxation on the following sources of Income:
- Interest; and
- Dividends; and
- Capital gains (other than on the sale of immoveable property in Cyprus); and
- Capital sums received from pensions, provident and insurance funds; and
- Capital sums remitted to Cyprus
All of the tax benefits detailed above are enjoyed even if the income has a Cyprus source and/or if it is remitted to Cyprus.
In addition there are: NO wealth and NO inheritance taxes in Cyprus.
Other Beneficial Features of the Cyprus Tax System for Individuals
- Income Tax Reduction for New Residents in Cyprus
Individuals who were not previously resident in Cyprus, take up residence in Cyprus for work purposes, and earn over €100,000 per annum, are entitled to the following tax benefit:
50% of employment income earned in Cyprus is exempt from income tax for a period of 10 years.
For reference, Cyprus’ standard income tax rates are:
- €0 to €19,500: 0%
- €19,501to €28,000: 20%
- €28,001to €36,300: 25%
- €36,301to €60,000: 30%
- Greater than €60,000: 35%
- Low Tax Rate: Foreign Pensions
The first €3,420 of a pension, from employment outside Cyprus, is tax free and individuals can elect to pay only 5% income tax on pension income in excess of this amount.
The Definition of Tax Residence and Non-Domicile Status
An Individual is considered tax resident, if they spend more than 183 days in Cyprus in any one calendar year. Under certain criteria individuals can become tax resident in Cyprus in 60 days.
Definition of Non-Domiciled Individuals
In accordance with the provisions of the Wills and Succession Law, there are two kinds of domicile:
- domicile of origin; i.e. the domicile received at birth (generally dependent on the father’s side), or
- domicile of choice; i.e. domicile acquired by establishing physical presence in a particular place and by demonstrating sufficient intention to make it the place of permanent residence
Regardless of the domicile of origin or choice, individuals who have been tax residents in Cyprus for at least 17 out of the last 20 years prior to the tax year in question, will be deemed to be domiciled in Cyprus for the purposes of the SDC Tax.
In any event, an individual who has spent 17 of the past 20 years, prior to the relevant tax year, as a Cyprus tax resident will be considered domiciled in Cyprus.
Non-domicile status in Cyprus offers a number of tax related benefits to individuals who are tax resident in Cyprus. The regime introduced in July 2015 offers an enhanced range of financial incentives for individuals to consider Cyprus as an attractive destination for their tax residence.
For further information about the attractive tax regime for individuals in Cyprus, please contact Robert Homem or Charalambos Pittas at the Dixcart office in Cyprus: email@example.com.