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Cyprus Non-Domicile Tax Status

Here are reasons why a UK retired person should relocate move redomicile to Cyprus Lower tax rates: Cyprus has one of the lowest corporate tax rates in the European Union, making it an attractive option for a retired person looking for a more tax friendly environment Lower cost of living: The cost of living in Cyprus is very low compared to the UK, making it a great choice for those looking to stretch their pension further Beautiful Weather: The average temperature in Cyprus is around 20°C, with the sun shining for over 300 days a year Easy access to healthcare: Cyprus has a public healthcare system that is free for residents and EU citizens, as well as private healthcare options Affordable housing: Property prices in Cyprus are much lower than the UK, meaning a retired person can get a lot more for their money Relaxed lifestyle: With its laidback atmosphere and slower pace of life, Cyprus is a great place to relax and enjoy retirement Access to the EU: As an EU member state, Cyprus offers access to the European Union and its benefits Safety: Cyprus is one of the safest countries in the world, with a low crime rate and strong police presence Rich culture: With its diverse history and culture, Cyprus is a great place to explore and experience something new Quality of life: With its stunning scenery, friendly locals and great climate, Cyprus offers a high quality of life for retirees. Convenient travel: Cyprus is well connected to the rest of Europe and the world, with direct flights to major cities Variety of activities: With its stunning beaches, ancient monuments and vibrant nightlife, Cyprus has something for everyone.

In order to encourage high net worth individuals to apply for Cyprus tax residency, the Cyprus government simplified the tax regime by eliminating taxation on passive income and by applying a deduction of 50% on Income Tax for non-Doms high earners taking up employment in Cyprus.

Cyprus Tax residence may be obtained by either spending 183 days in Cyprus or by spending only 60 days annually provided the applicant follows within the 60-day rule scheme. Individuals tax residents are taxed on worldwide income, however there is unilateral tax credit available for taxes paid abroad.

Definition Of Non-Domiciled Persons

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 by an individual at birth; or

  • Domicile of choice:  i.e. the domicile acquired by an individual by establishing physical presence in a particular place with the intention to make it the place of permanent residence

Irrespective 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 Law.

In the case of persons who have their domicile of origin in Cyprus, they will be considered as non-domicile in the following cases:

  • If they acquired and maintained a domicile of choice outside Cyprus, provided that they were not tax residents in Cyprus for any continuous period of at least 20 consecutive years prior to the tax year in question; or

  • If they were not tax residents in Cyprus for a period of at least 20 consecutive years immediately prior to the entry into force of the non-domicile provisions (i.e prior to 16/07/2015).

Tax Benefits of Non-Domiciled Persons

Dividends and interest earned by individuals who are tax residents in Cyprus are subject to SDC tax at the rate of 17% and 30% respectively, regardless of the source of the income (i.e. from Cyprus or from abroad). This SDC tax applies only for individuals who are both Cypriot tax residents and domiciled in Cyprus. Therefore, non-domiciled tax residents are tax exempt for any dividends and interest received in Cyprus (except for minimal GESY contributions, 2.65% from 1st March 2020. 

Additional Tax Advantages of Non-Domiciled Persons

Foreigners who become Cypriot tax residents enjoy additional tax advantages such as:

  • Interest and dividends are liable to SDC instead of income tax, but non-Cyprus domiciles are exempt (except for minimal GeSY contributions).

  • Profit from sale of shares and other qualifying titles is specifically exempt from Cyprus taxation, provided that the underlying assets do not include immovable property located in Cyprus.

  • The first €19,500 of taxable income is tax exempt. Any taxable personal income in excess of this amount is taxed at progressive rates ranging from 20% to 35%. 

  • Exemption of 50% for remuneration from employment exercised in Cyprus by persons who were resident outside Cyprus before commencement of their employment. The exemption applies for a period of 10 years commencing from the year of employment, if such income exceeds €100,000 per year.

  • If remuneration is from Cyprus and less than €100,000, then 20% exemption is granted or €8,550, whichever is lower. For employment between 2012 and 2025, the exemption applies for a period of 5 years starting from the tax year following the year of employment.

  • Exemption of 100% on remuneration of salaried services outside Cyprus to a non-resident employer or a permanent establishment outside the Republic of a resident employer, for an aggregate period in the year of assessment of more than 90 days. 

  • If Cyprus immovable property was acquired up to 31st December 2016, then profit from subsequent future disposal of such property will be exempt from the 20% Capital Gains Tax.

  • Pension received in respect of past employment abroad is taxed in Cyprus at the flat rate of 5% for amounts exceeding €3,420 per year.

  • There is no inheritance tax, no wealth tax, no gift taxation.

  • If individual is beneficiary of a Trust, then he/she is exempt from tax in Cyprus, to the extent that the income at/from the Trust would be in the form of interest or dividends.

Relikor Serv, in cooperation with legal experts, offers clients a full range of services to establish non-domicile tax status and benefit from the above advantages.

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