In July 2015, a number of bills relating to the Cyprus taxation system were approved by the Council of Ministers and subsequently enacted into legislation by the Parliament. The key highlight of these new bills is the introduction for the very first time of the “non-dom” status for Cyprus tax residents, who are not considered as domiciled in Cyprus and will be exempted from defense tax (SCD) applicable on dividends, interest and rental income.
Definition of Non-Dom
The term “domiciled in Cyprus” is defined by the Cyprus tax law as a person who has either his/her domicile of origin (given at birth) in Cyprus or domicile of choice (establishing a home with the intention to reside in Cyprus permanently or indefinitely). It is noted that the determination of domicile is a distinct concept from citizenship or residence.
For the purposes of SCD, the following are exempted from the above definition (i.e. labelled Non-Doms):
- An individual who has obtained and maintained a domicile of choice outside Cyprus, provided that this person was not a Cyprus tax resident for any period of at least 20 consecutive years preceding the tax year in question; or
- An individual who has not been a tax resident of Cyprus for a period of 20 consecutive years prior to the introduction of the law (i.e. prior to 16 July 2015),provided the qualified individual has not been a Cyprus tax resident for 17 years out of the last 20 years prior to the tax year in question.
Applicability- Tax Residency Requirements
183 Day Rule
The current ‘183 day rule’, i.e. an individual is deemed a Cyprus tax resident if he/she spends at least 183 days in the tax year in Cyprus, remains in place and unchanged.
60 Day Rule
In July 2017, the Income Tax Law was amended by adding a second tax residency test- the ‘60 day rule’. Under the ‘60 day rule’, an individual is now considered as a tax resident of Cyprus if, in the relevant tax year, he/she:
- remains in Cyprus for at least 60 days in the year of assessment; and
- is engaged in any business in Cyprus and/or is employed in Cyprus and/or holds an office (director) under a Cyprus tax resident company at any time during the year of assessment, provided that such is not terminated during the tax year; and
- maintains a permanent residence in Cyprus (whether owned or rented).
The ‘60 day rule’ allows an individual to be considered as a tax resident of Cyprus who in the relevant tax year
- does not remain in any other country for more than 183 days in total, and
- who is not a tax resident in any other country.
The aforementioned Cyprus tax residency rules apply for the entire 2017 tax year, i.e. as of 1 January 2017, irrespective of the date of the amendment of the said law.
We can advise clients on the Cyprus Tax Residency requirements with an accent on the practical issues of obtaining the Non – Dom as well as how to utilise this, in the best possible way.
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