Understanding the Cyprus Non-Domicile (Non-Dom) Tax Regime

Table of Contents

1.      Introduction

2.      What is the Cyprus Non-Dom Regime?

3.      Residency Rules: 183-Day Rule & 60-Day Rule

4.      Tax Benefits for Non-Domiciled Residents

5.      Practical Example: Benefits of Becoming a Cyprus Non-Dom

6.      Conclusion

Introduction

Cyprus has become increasingly attractive for high-net-worth individuals, investors, digital nomads, and business owners. A key reason is the Cyprus Non-Domicile (Non-Dom) tax regime, which provides significant tax advantages to those who become tax residents of Cyprus without being domiciled.

In simple terms, the Non-Dom regime can greatly reduce taxes on worldwide investment income while you enjoy life in a sunny, business-friendly EU country. This article explains how the Cyprus Non-Domicile regime works and how you can benefit from it.

What is the Cyprus Non-Dom Regime?

The Cyprus Non-Dom regime is designed for individuals who move to Cyprus, become tax residents, but are not “domiciled” in Cyprus. Non-Doms are exempt from certain local taxes on dividends, interest, and rental incomes.

This means that a Non-Dom resident in Cyprus can enjoy zero Cyprus tax on most overseas investment income, making it one of the most attractive regimes in Europe for global earners.

Residency Rules: 183-Day Rule and 60-Day Rule

To benefit from the Non-Dom regime, you first need to become a Cyprus tax resident. There are two routes:

·         183-Day Rule: Spending more than 183 days in Cyprus in a calendar year makes you a tax resident.

·         60-Day Rule: If you don’t meet the 183-day threshold, you can still qualify if you:

o   Spend at least 60 days in Cyprus.

o   Do not spend over 183 days in any other country and are not tax resident elsewhere.

o   Work, run a business, or hold a position in a Cyprus tax-resident company.

o   Maintain a permanent home in Cyprus (owned or rented).

By meeting either rule, you become a Cyprus tax resident, the first step toward unlocking Non-Dom tax benefits.

Tax Benefits for Cyprus Non-Domiciled Residents

Cyprus Non-Domiciled residents are exempt from the Special Defence Contribution (SDC) tax, which normally applies to passive income. Key benefits include:

·         Dividends: 0% tax on worldwide dividends.

·         Interest: No tax on bank interest or other interest income.

·         Rental Income: No 3% SDC tax on rent.

Other foreign income is generally taxed under normal income tax rules if you are a Cyprus tax resident. The Non-Dom regime’s big advantage is the elimination of SDC tax on investment income, which in practice means many forms of passive income become tax-free in Cyprus for Non-Doms. In addition, Cyprus has no wealth tax and no inheritance tax, making it even more attractive for long-term planning.

Practical Example

Alex, a successful software developer from Canada, decides to relocate to Cyprus as a digital nomad. He meets the 60-day rule requirements by working remotely for his Cyprus-based company and renting an apartment in Limassol. Alex becomes a Cyprus tax resident (Non-Dom) since he has no prior ties to Cyprus.

·         Salary Income: Alex’s employment income from the Cyprus company is taxed at normal income tax rates. As a new resident, Alex might also explore the 50% income tax exemption for first-time Cyprus employees earning over €55k, which is another incentive.

·         Dividend and Interest Income: Alex also has investments back in Canada yielding €50,000 in dividends and €5,000 in bank interest each year. As a Non-Dom, Alex pays €0 on this €55,000 investment income in Cyprus. There is no SDC and no income tax on it. This represents a significant tax saving for Alex. For comparison, if he stayed in Canada or another high-tax country, that investment income might be subject to substantial taxes. In Cyprus, under the Non-Dom regime, his dividends and interest are entirely tax-free locally.

Alex’s active income is taxed normally (with possible expat incentives), but his passive income streams from abroad are largely untouched by Cyprus tax. Over the years, this could save him tens of thousands of euros, making Cyprus a very attractive base.ousands of euros annually.

Conclusion - Cyprus Non-Domicile Tax Regime

The Cyprus Non-Domicile regime offers a clear, effective way to reduce taxes on dividends, interest, and rental income while enjoying Cyprus’s lifestyle and EU benefits. By becoming a Cyprus tax resident under either the 183-day or 60-day rule, and ensuring you are non-domiciled, you can legally pay no Cyprus tax on your dividend, interest, and other passive income streams.

If you are considering relocating to Cyprus, expert legal and tax advice is essential to ensure compliance and maximize the benefits of becoming a Non-Dom resident.

At George Liasides LLC, our experienced team can guide you through every step of the process, from residency to long-term tax planning. Contact us today to explore how you can take advantage of the Cyprus Non-Domicile tax regime.